An audit report published by the Central Bank of Kenya and a private firm in March 2016 triggered panic withdrawals from the Chase Bank leading to its closure, a court heard yesterday.
Eustace Kariuki Nyaga of the National Bank of Kenya said depositors rushed to withdraw money from the lender after publication of its financial status in the media.
Nyaga was testifying in the case of former chairman of Chase Bank Mohammed Zafrullah Khan and 10 others charged with conspiracy to fraud, theft and money laundering.
He told senior principal magistrate Martha Mutuku that “ no bank can stop customers withdrawing their money whenever they wish.”
Khan and the others are being tried for Sh1.6billion fraud. The trial began yesterday.
Led in evidence by state prosecutor Rubby Okoth, Nyaga who is also a former general credit manager with the bank said social media reports caused a run on the bank.
“An audit report published on March 2016 by the regulator and Delloite caused Chase Bank to close down,” Nyaga said.
The NBK employee who joined Chase Bank in 2014 after working for Barclays Bank for 16 years said he could not comment on the bank's financial status before 2009.
“The bank's working system was not perfect,” lawyer David Chege defending Khan asked the banker.
“There is no bank which is perfect in its operations. That’s why I was employed to identify the areas which needed to be looked into," Nyaga said.
The first prosecution witness explained in detail to Mutuku how loans are advanced to customers.
Khan is charged alongside former Chase Bank senior employees Duncan Kabui Gichui , James Mwaura and Makarious Omondi Agumbi, Amira Claudia Wagner, Mohammed Najifrullah Khan, Camellia Investments Limited, Colnbrook Holdings Ltd, Golden Azure Investments and Cleopatra Holdings Ltd.
The ten have been charged with conspiring to defraud the bank between August 28, 2009 and March 3, 2016.
Mwaura (general manager credit) and Omondi (general manager finance) have denied theft of Sh483,328,000 by virtue of their employment.
Zafrullah, Kabui, Mwaura and Omondi are accused of stealing Sh46 million on February 28,2012.
Another charge reads that on December 2015, Zafrullah, Mwaura, Omondi and Camellia stole Sh483,328,000 property of the collapsed lender.
