CBK boss defends Equity, Spire Bank sale deal


Central Bank of Kenya Governor Patrick Njoroge responds to questions from members of the Finance Committee for the National Assembly on questions regarding Spire Bank on December 1, 2022.

Photo credit: Lucy Njoroge | Nation Media Group

Central Bank of Kenya (CBK) Governor Patrick Njoroge has defended the controversial acquisition of Spire bank by Equity Bank.

This came as members of the Finance and National Administration Committee of the National Assembly accused him of allegedly “sleeping on the job and failing to rescue” the Mwalimu Sacco limited-owned loss-making bank and working to see it collapse.

In the acquisition deal, Mwalimu Sacco Limited will pay Equity bank Sh422 million in the liability, asset purchase deal that committee members said is not good for the teachers-owned bank even as Dr Njoroge said the Sacco cannot save the bank from liquidity issues.

Interestingly, the bank’s loan book has been discounted at 13 percent despite the loans being secured.

Dr Njoroge told the committee chaired by Molo MP Kimani Kuria that the bank makes Sh100 million in losses every year translating to Sh1.2 billion a year.

Since the teachers acquired the bank in a process that started in 2014 and concluded in 2016, it has made a cumulative loss of about Sh13.5 billion in hard-earned teachers’ savings.

The losses made are a result of the payments the bank pays on the customer deposits of Sh2 billion, which far outweighs the loans, some of which are non-performing.

The loss-making bank has seen its nonperforming loans increase from Sh1.3 billion to the current Sh2.7 billion contributing hugely to the country’s 14 percent in nonperforming loans.

“I believe this is the best chance for the teachers and I am happy Equity Bank is ready to clean up the mess,” said Dr Njoroge.

However, committee members John Ariko (Turkana South) and Sheikh Umul Ker Kassim (Mandera County Woman MP) accused Dr Njoroge of doing little to save the bank.

“What is coming out is that CBK facilitated the collapse of the teachers’ bank. He has provided no evidence to show that CBK helped it,” said Mr Ariko with Ms Kassim also at a loss about the role CBK played in ensuring the Spire bank’s stability.

“What you have broken down for us is the sequence of the events leading up to the acquisition of the bank. You haven’t told us what you did to help the bank from the issues it is facing,” said Ms Kassim.

Eldas MP Adan Keynan, a member of the committee said that the issues facing Spire bank require the intervention of the Cabinet and that they are not as simple as the CBK boss may want the MPs to believe.

“The matter of Spire bank is a matter that calls for a national dialogue and the intervention of the Cabinet. You are tasked as a regulator- to protect customer deposits but from the look of things, you haven’t done anything! Soon, we will be seeing customers in a rush to withdraw their monies from the bank,” said Mr Keynan.

Kitui Rural MP David Mboni also accused CBK of laxity in the issues Spire bank is facing.

“There are two institutions that do not want the existence of the Teachers’ bank. They are Mwalimu Sacco limited and CBK. I see this as the worst deal ever. Mwalimu Sacco wants to give out the bank for free and even pay for it while CBK wants to have the bank closed,” said Mr Mboni.

With Equity bank interested in customer deposits and the loan book, it means that the teachers’ bank will be left with its banking license and its current 12 branches spread in some parts of the country.

The CBK boss also revealed that so far CBK, the industry regulator, has Sh700 million in liquidity in exchange for Treasury Bills from Spire bank.

This is contrary to claims that CBK has pumped in Sh1.7 billion in transactional costs. Mwalimu Sacco has at least 1,200 members who are teachers.

In the whole of last year, the bank lost Sh1.2 billion and as at June this year, Sh600 million has already been lost with Dr Njoroge warning that unless the Equity takeover deal is fast-tracked, the teachers’ hard-earned money will continue to be lost in interest payments to the customer deposits.

Yesterday, Dr Njoroge told the committee that the bank's employees will not lose their jobs even if Equity comes on board.

The Spire bank workers went to court seeking assurance that they should not lose their jobs in the proposed takeover.

A deal was struck between Spire bank and its employees and registered in court, meaning that they are protected from any job loss occasioned by the bank’s takeover.