Social media ‘chased bank’ out of town – CBK boss
- 5 years ago
Central Bank of Kenya (CBK) Governor Patrick Njoroge now says mass withdrawals on Wednesday at Chase Bank following messages spread on social media, is what forced the regulator to place the institution under receivership
He says despite having billions in unpaid loans, the bank would still be operating, but could not sustain the business due to the panic withdrawals.
Overview
The bank invested Sh8.7 billion in real estate which after analysis, did not show any sign of bringing returns. Directors on the other hand, took another Sh1billion as insider unsecured loans while Sh6.9billion was invested in some of their personal entities
After audit, Deloitte expressed gave what is termed as 'qualified opinion', raising concerns that the bank's balance sheet was not clean
“Yesterday (Wednesday) I made a point that no one has a right to shout fire in a crowded theatre. But frankly this is what happened. You did have some individuals who actually shouted fire in a crowded theatre and to me, there is nothing that can be more reckless than that,” Njoroge said at a media briefing on Thursday.
He says no bank in the world can sustain operations with the kind of pressure Chase Bank faced “where everybody went to get their money at once.”
At the moment no bank has a capacity to pay more than 20 percent of deposits in a day or at once.
“No bank has the deposits ready 100 percent. So it is clear that if one of us made a horrendous statement, you can cause a run or a crisis; and that is what actually happened. The bank could not sustain the loss for a period of time,” the governor explained.
The regulator plans to pursue individuals who sent a WhatsApp message that indicated that Chase Bank was on its knees and ‘could close down any time soon due to huge loans.”
He says despite having billions in unpaid loans, the bank would still be operating, but could not sustain the business due to the panic withdrawals.
Overview
The bank invested Sh8.7 billion in real estate which after analysis, did not show any sign of bringing returns. Directors on the other hand, took another Sh1billion as insider unsecured loans while Sh6.9billion was invested in some of their personal entities
After audit, Deloitte expressed gave what is termed as 'qualified opinion', raising concerns that the bank's balance sheet was not clean
“Yesterday (Wednesday) I made a point that no one has a right to shout fire in a crowded theatre. But frankly this is what happened. You did have some individuals who actually shouted fire in a crowded theatre and to me, there is nothing that can be more reckless than that,” Njoroge said at a media briefing on Thursday.
He says no bank in the world can sustain operations with the kind of pressure Chase Bank faced “where everybody went to get their money at once.”
At the moment no bank has a capacity to pay more than 20 percent of deposits in a day or at once.
“No bank has the deposits ready 100 percent. So it is clear that if one of us made a horrendous statement, you can cause a run or a crisis; and that is what actually happened. The bank could not sustain the loss for a period of time,” the governor explained.
The regulator plans to pursue individuals who sent a WhatsApp message that indicated that Chase Bank was on its knees and ‘could close down any time soon due to huge loans.”