Governors yesterday urged the Central Bank to consider a bailout for the counties hit by the collapse of Chase Bank, saying a financial crunch is imminent.
Council of Governors chairman Peter Munya warned that some counties, that banked with Chase Bank, could soon ground to a halt should the government fail to come to their rescue.
The Meru governor said the affected county governments will not be able to pay salaries or pay suppliers if the crisis is not resolved quickly.
He did not name the affected counties.
Munya said it is impractical for counties to shelve such serious obligations until the bank is reopened, saying it is only the government that can intervene to help the counties get their money.
“Some counties had savings in the bank and can’t wait until it is re-opened. We ask the national government to ensure the counties have access to their money in this bank to serve residents. It must also enforce stability in our banks,” Munya said.
Chase Bank collapsed two weeks ago, following liquidity challenges after massive internal financial failures that saw a huge internal uptake of loan facilities eat into the bank’s core capital, followed by panic withdrawals.
Munya said unless the CBK steps up regulation to enforce compliance in financial institutions, the panic and fear among depositors could lead to imminent collapse of the banking industry.
