State to audit books of 17 collapsed banks
Dubai Bank in Nairobi in a picture taken on August 24, 2015. The Kenya Deposit Insurance Corporation is seeking to investigate the financial dealings of 17 collapsed lenders.
The Kenya Deposit Insurance Corporation (KDIC) is seeking to investigate the financial dealings of 17 collapsed lenders, which are currently under liquidation, to check the accuracy of their books.
The lenders include Dubai Bank, Thabiti Finance, Trade Bank, Daima Bank, Middle East Africa Finance, Trust Bank, Post Bank Credit, Meridien Biao Bank, and Reliance Bank.
Others are Euro Bank, Ari Bank, Kenya Finance Bank, Pan African Credit, Pan African Bank, Prudential Building Society, Prudential Bank and Chase Bank.
“The corporation intends to carry out an external audit on 17 financial institutions under liquidation in order to ascertain whether the respective institutions have conducted their business in accordance with the law for the specified period,” said the KDIC.
Most of these bank collapses happened in the 1990s and early 2000s amid the economic malaise of the period under then-President Daniel arap Moi and continued into the early reign of Mwai Kibaki.
Unprotected customer
As of June 2018, some 25 lenders had collapsed with a total of Sh21.72 billion worth of unprotected customer deposits as at liquidation.
KDIC is looking for external auditors to ascertain all assets and liabilities of the lenders in liquidations as of June 2022 and vet their authenticity.
The corporation wants to check whether some assets owned by the lenders are currently outside KDIC’s control as well as if the lenders had accurately revealed their liabilities.
“The external auditor should confirm the availability of the assets referred to above and whether they are in the control of KDIC as the liquidator,” said KDIC, “confirmation of the authenticity and/or genuineness of the recorded liabilities of Seventeen institutions under liquidation as at June 30, 2022.”
Kenya last year enacted a law that will see depositors in collapsed banks will be compensated within six months.
Then, President Uhuru Kenyatta, last year assented to the Kenya Deposit Insurance (Amendment) Act 2020 that amended the Kenya Deposit Insurance (KDI) Act.
“The corporation (Kenya Deposit Insurance Corporation) shall make the payment to a customer under subsection (1), within six months or any shorter period following the conclusion of liquidation of the institution insured,” says the Act.
Wealthy savers
Kenya in July 2020 increased the depositors’ compensation in collapsed banks to Sh500,000, marking the first increase in 30 years. It was increased from Sh100,000, which had remained since 1989.
The low compensation had exposed wealthy savers to higher losses in the event of bank closures because the refund was not adjusted to take into account changing economic realities over the three decades.
