Big Imperial Bank clients to wait longer as refunds begin Tuesday

What you need to know:

  • Kenya Deposit Insurance Corporation (KDIC), had earlier ordered payments for deposits of up to Sh1 million per customer through KCB and DTB banks.
  • The KDIC announced on Wednesday that an additional maximum of Sh1.5 million per depositor would be paid from next Tuesday through NIC Bank - bringing the total payment of Imperial Bank’s depositors to Sh2.5 million each.

Big depositors of the collapsed Imperial Bank will have to wait longer to access their cash, even as those holding balances of Sh2.5 million or less get full compensation beginning Tuesday next week.

The Central Bank of Kenya-appointed receiver manager of the collapsed lender, the Kenya Deposit Insurance Corporation (KDIC), had earlier ordered payments for deposits of up to Sh1 million per customer through KCB and DTB banks.

The KDIC, an arm of the Central Bank of Kenya (CBK), announced on Wednesday that an additional maximum of Sh1.5 million per depositor would be paid from next Tuesday through NIC Bank.

This brings the total payment of Imperial Bank’s depositors to Sh2.5 million each, with those holding larger amounts awaiting the outcome of a court case stopping their compensation.

“Compensation of large depositors is dependent on the court case,” said John Gachora, chief executive of NIC Bank, which was appointed the liabilities and assets consultant for Imperial.

He said the court case stopped the transfer or sale of Imperial Bank’s assets, adding that such disposals would be necessary to build funds with which the big depositors will be paid.

Shareholders of the collapsed bank in a statement said yesterday they had reached an agreement with the KDIC allowing for the liquidation of the lender’s Treasury Bills to provide cash for payment of the Sh1.5 million to depositors.

The bank owners went to court and obtained an order stopping any dealing in the bank’s assets, arguing that this would put the lender on the path to liquidation which they are opposed to.

It remains to be seen when and how the court will rule on the matter, with the large depositors comprising high-net-worth individuals and businesses.

In the absence of the legal barrier, the CBK had anticipated that about 40 per cent of the remaining deposits was to be paid in a structured manner in what would raise the cumulative payout to 59 per cent of all verified deposits.

NIC is slated to play a major role in liquidating Imperial Bank, a process that will precede compensation of the big depositors should the court allow it.

The Nairobi Securities Exchange-listed firm intends to take over some deposits, assets and liabilities of the collapsed institution following an agreement with the banking sector regulator.

The KDIC plans to dispose of some Imperial’s assets including branches and deposits to NIC, with the agency expected to retain control of other assets for future sale to other parties as part of the overall liquidation process that will also see the compensation of other creditors.

This will be subject to due diligence and negotiations between the KDIC and NIC which will also hire a significant number of Imperial’s employees.

The arrangement is similar to the one reached by CBK and KCB Group which gives the country’s biggest bank an option to buyout Chase Bank which was the latest bank to fail.

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