The Central Bank of Kenya (CBK) has placed Imperial Bank under receivership with the Kenya Deposit Insurance Corporation (KDIC) appointed as a receiver for twelve months.

This comes barely three months after the bank raised $20 million bond to shore up its capital reserves.

“CBK has become aware of unsafe and unsound business condition at Imperial Bank. The appointment of KDIC as a receiver for Imperial Bank Kenya Limited has been carried out in the interest of its depositors, creditors and members of the public,” the bank said in statement.

Kenya Deposit Insurance Act, 2012 requires CBK to appoint the  KDIC as a receiver of a bank, if, among others, an unsafe or unsound condition to transact exists; a bank is likely to fail to meet its financial obligations, a bank has substantially insufficient capital or if there is a violation of any law or regulation.

The move comes barely two months after another bank, Dubai Bank was placed in receivership and subsequent liquidation.

READ: Dubai Bank liquidator to start refunding depositors

While placing it in receivership, CBK said that it has considered Dubai Bank’s violations of banking laws and regulations, including failure to maintain adequate capital and liquidity ratios as well as provisions for non-performing loans and weak corporate governance structures is detrimental to the interests of its depositors, creditors and the public.

Dubai Bank has in the past three years been fighting to disprove claims that its clients risk losing billions of shillings to dodgy book and record keeping.

Imperial bank operates in Kenya and Uganda. Last month, the bank associated with the wealthy Popat Family issued a bond worth $20 million at an interest of 15 per cent to shore up its core capital after its ratio of total capital to total assets was constrained because of the new rules that increased the statutory requirement to 14.5 per cent from January this year. 

UPDATE : The Bank of Uganda (BoU) also announced Tuesday that it was taking over management of the Imperial Bank's Ugandan subsidiary following CBK's suspension of its operations in Kenya. However, BoU clarified that the Ugandan branch would remain open and that operations would continue under the control of the regulator.

UPDATE: Kenya's market regulator, the Capital Markets Authority (CMA), suspended the listing and trading of Imperial Bank's corporate bond after the lender was put into receivership, the regulator said on Tuesday.

Imperial Bank had offered a Ksh2 billion ($19.40 million) bond in August with a closing date in September. Tuesday's statement about the bond listing was issued by the CMA and the central bank. (Reuters)