BANKING

Charterhouse Bank faces liquidation on CBK nod

Was placed under statutory management in June 2006 over violations of the Banking Act

In Summary

•Charterhouse Bank was established in 1996 after taking over the operations of Middle East Kenya Finance Limited.

•Subsequently, the institution converted to a fully-fledged bank in 1998 with 10 branches in Nairobi, Kisumu and Mombasa, most located at former Nakumatt.

CBK Headquarters, Nairobi/
CBK Headquarters, Nairobi/
Image: FILE

The Central Bank of Kenya has approved the liquidation of Charterhouse Bank Limited.

This comes less than a month since the banking sector regulator sent under receivershipChase Bank the same way( into liquidation).

CBK on Friday announced it had appointed the Kenya Deposit Insurance Corporation (KDIC) as liquidator of Charterhouse Bank Limited (CHB) in terms of Section 54(1)(b)(v) of the Kenya Deposit Insurance Act, 2012.

This follows the submission of the Statutory Management Report by the Statutory Manager on May 6, 2021, recommending that CHB be liquidated.

"The report indicates that in view of the severe violations of the Banking Act by CHB and its inability to address them, liquidation is the only feasible option," CBK said in a statement.

It says it has assessed the recommendation and considered that liquidation would facilitate the orderly resolution of the assets and liabilities of CHB in accordance with the Laws of Kenya, to protect the interest of depositors, its creditors, other stakeholders and the wider public interest.

Charterhouse Bank was established in 1996 after taking over the operations of Middle East Kenya Finance Limited.

Subsequently, the institution converted to a fully-fledged bank in 1998.

The bank had 10 branches in Nairobi, Kisumu and Mombasa.

Eight of these were located at branches of the former Nakumatt Supermarket Stores, an associate of the bank through common shareholding, with reports the bank was being used as a strategic money laundering tool. 

 By 2006, CHB was classified as a small bank, ranked 30 out of 41 banks with an asset base of Sh4 billion and a market share of 0.55 per cent.

It had 428 loan accounts valued Sh2.9 billion and 4,699 deposit accounts valued at Sh2.9 billion.

Its equivalent ranking at end 2020 with the 2006 asset base would be the smallest of all banks.

 On June 23, 2006, CBK placed CHB under statutory management pursuant to Section 34(1) (d) of the Banking Act.

This followed severe violations of the Banking Act by CHB relating to lending, accuracy of returns submitted to CBK, and failure to obtain account opening documentation for a number of customers.

 "The placement of CHB under statutory management and take over by CBK was done in the interest of the bank’s depositors, creditors and members of the public," CBK notes.

KDIC is expected to release information about the liquidation of the bank and payment of depositors "in due course."