Kenya: Social media rumors caused bank's 'closure' – Central Bank Chief

Governor of the Central Bank of Kenya (CBK), Dr. Patrick Njoroge, has blamed rumours spread on social media for triggering the bank’s problems, as customers trooped to the bank’s branches on Wednesday and it could not cope with the withdrawals.

There were widely circulated messages making the rounds on whatsapp platform that Chase Bank, which has been put under receivership by the CBK, was in trouble.

Social media was a trigger that saw Chase Bank fail to meet obligations, but there were prior concerns – njorogep. pic.twitter.com/q8YXagDzZL

— Nation FM (NationFMKe) April 7, 2016

‘‘Chase Bank Limited experienced liquidity difficulties, following inaccurate social media reports and the stepping down two of its directors. Consequently, it was not able to meet its financial obligations on April 6, 2016,’‘ a statement from the CBK said.

Kenya’s Central Bank on Thursday placed Chase Bank, one of the country’s small lenders, into receivership after it misreported its loans and suffered a deposit run.

It is the latest move by the new regulator to clean up the sector in east Africa’s largest economy.

Chase Bank thus becomes the third bank the Central Bank of Kenya has taken over since Patrick Njoroge became governor last July.

The governor said all 62 of Chase’s branches would be closed until new management is put in place.

Kenya has 42 banks and analysts say about another dozen smaller lenders are at risk as depositors move their assets to larger institutions. Njoroge has said he would welcome consolidation in the sector but would not impose it.

On Wednesday the chairman and managing director “stepped aside” after it reported a Ks686m ($6.8m) loss in 2015 compared to a Ks2.4bn profit the previous year. It also restated its results that showed loans to employees and directors totalled Ks13.6bn, up from Ks3.2bn it had reported a week earlier.

Dubai Bank of Kenya was liquidated in August and Imperial Bank was put into receivership in October. The National Bank of Kenya last month sent home Munir Ahmed, its chief executive, and five senior managers pending an internal audit.