LIQUIDATION

Chase Bank depositors first to benefit from Sh500,000 limit

Collapsed Chase Bank liquidators to pay depositors

In Summary
  • The deposit insurance agency revised the coverage limit from Sh100,000 which has been in place since 1989
  • Last week, CBK allowed liquidation of Chase Bank 
Kenya Deposit Insurance Corporation Chief Executive Officer Mohamud Mohamud gives an update on Chase Bank's receivership during a media briefing in Nairobi on January 12, 2018. /ENOS TECHE
Kenya Deposit Insurance Corporation Chief Executive Officer Mohamud Mohamud gives an update on Chase Bank's receivership during a media briefing in Nairobi on January 12, 2018. /ENOS TECHE

Depositors of defunct Chase Bank, set to wind up will be the first group to receive an enhanced insured deposit limit of Sh500,000 effected on July 1, 2020.

The Kenya Deposit Insurance Corporation (KDIC) revised the coverage limit from Sh100,000, offering a huge relief to savers who have struggled to retrieve their cash from failed banks.

The low compensation had exposed super savers to higher losses in the event of bank closures as the refund was not adjusted to consider changing economic realities over the three decades.

“The new limit will give more protection to depositors in the most unlikely event of a bank failure,”  KDIC chief executive Mohamud Ahmed Mohamud said. 

In a media statement issued Tuesday, KDIC said more information about the planned liquidation and deposit payment will be made in due course.

KDIC which has been the receiver since April 7, 2016, was appointed as the liquidator for Chase Bank by the Central Bank of Kenya following the receiver’s report recommending for its liquidation.

''Considering the weak status of CBLIR’s financial position, liquidation was the only feasible option to facilitate the orderly resolution of the residual assets and liabilities of CBLIR in accordance with the Laws of Kenya to protect the interest of CBLIR depositors, its creditors and the wider public interest,” said KDIC.

The placement of the bank under statutory management was on the backdrop of events on April 6, 2016, which saw panic withdrawals  caused by ‘unconfirmed’ rumors largely on social media, which ended in a run on the lender.

On April 20, CBK approved KCB as CBLIR receiver-manager allowing the lender to resume limited banking operations from which customers got immediate access to deposits to a maximum of Sh1 million.

From this process, 97 per cent of Chase bank depositors represented in an equivalent of 162,970 deposit accounts accessed their funds in full.

Two years later in August 2018, the State Bank of Mauritius (SBMO) that established a local subsidiary in the process carved 75 per cent of the value of deposits at Chase Bank and an equivalent size of assets out.

KDIC has managed the remaining 25 per cent of the value of deposits alongside other assets and liabilities in Chase Bank.

The resolution of Chase Bank leaves Imperial Bank Limited as the only other lender in receivership.

Charterhouse Bank Limited is the other bank under the watch of CBK and currently lies in statutory management.