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February 19, 2018

Chase depositors may lose 25% of savings

Chase Bank Ltd customers read the regulator's notice at the door of Wabera Street branch on April 7, 2016. /Jack Owuor
Chase Bank Ltd customers read the regulator's notice at the door of Wabera Street branch on April 7, 2016. /Jack Owuor

Depositors with the troubled Chase Bank stand to lose 25 per cent of their funds under a new structure that has seen the institution taken over by the State Bank of Mauritius (SBM).

On Friday, the Central Bank of Kenya revealed that SBM would take over 75 per cent of the Sh76 billion held in restricted accounts within Chase Bank. This will translate to Sh57 billion, with the remaining Sh19 billion remaining with Chase Bank. The CBK was not however clear on what shareholding percentage SBM was acquiring at the bank that is currently in receivership.

According to CBK Governor Patrick Njoroge, depositors will have access to the Sh57 billion from January 1, 2018, but in three installments that will run upto 2021. Njoroge did not however give any direction on the remaining Sh19 billion that will be held at Chase Bank, leaving depositors with fears that they will lose their savings.

“The governor didn’t want to commit on the 25 per cent that will remain in Chase Bank, only giving assurance that ‘it remains your money’,” said a representative of one of the depositors who attended the meeting at Crowne Plaza.

In the first installment, SBM will transfer a third of the depositors’ funds into a current account with the bank. This amount will be available for withdrawal from January 1, next year.

In the second compensation plan for depositors, another third of the savings will be transferred to a savings account in SBM by December 31, 2017. This amount will also become available from January 1, but will be subject to the bank’s savings accounts terms and conditions. The depositors will also enjoy a 7 per cent per annum interest on their savings in these accounts. The remaining third of the unlocked savings will be availed in three installments, spanning over three years. Interest will also be earned at 7 per cent pa. It was not clear from the Friday meeting whether depositors will be required to open new bank accounts with SBM or their current accounts will be transferred to the new owner as they are.

The CBK governor said SBM, which in May this year acquired Fidelity Commercial Bank, would start its due diligence on Chase Bank this week. This exercise is expected to be completed by the end of this month. Among others, the due diligence will help SBM to determine the number of Chase Bank’s employees it will retain in the new structure.

Among the banks that expressed their interest in acquiring Chase Bank include French banking giant Société Générale, which was recently given a license to open a representative office in Kenya. Others were listed as First Rand of South Africa, Stanbic Bank, Kenya Commercial Bank and I&M Bank.

 

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