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Uganda puts Imperial Bank’s stake in Kampala unit on sale

Thursday October 22 2015

Ugandan authorities have put troubled Imperial Bank’s 51 per cent stake in the lender’s Kampala subsidiary on sale in a move that signals a possible direction Kenyan regulators might take in resolving the crisis that led to the bank’s closure two weeks ago.

Central Bank of Kenya (CBK) governor Patrick Njoroge made the revelation even as he acknowledged that the regulator’s own supervision department officials are among the key players under investigation over the sudden fall of the mid-tier lender.

“In Uganda, they are trying to sell the 51 per cent shareholding of Imperial Bank Kenya to a particular investor and to resolve the bank’s problems that way,” said Dr Njoroge.

The list of those under investigation for massive fraud that led to the bank’s collapse includes directors of the bank, its management, and external auditors.

The full extent of the mid-tier lender’s troubles will be known by mid next week, Dr Njoroge said, adding that the forensic auditors had instructions to work within that deadline.

The decision by the Ugandan authorities to force a sale of Imperial Bank Kenya’s stake signals that Kenya could also consider having a substantial shareholding of the bank sold to other lenders to deal with the confidence crisis that the receivership has caused among depositors.

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Such a move should restore some degree of confidence among the savers and help stem the anticipated tide of massive withdrawals when the bank is reopened.

In Kenya, Dr Njoroge said, the forensic auditors are also investigating whether loans may have been issued irregularly or financial numbers fudged. He confirmed that a US firm FTI Consulting had been appointed to investigate alleged irregularities and malpractices in the bank that was closed early last week.

“What we have right now are allegations. Nothing has been verified and we cannot go into specifics about something we are not sure of until the forensic audit is completed,” Dr Njoroge said when journalists demanded details of the “malpractices” at the bank.

Force a sale

The Bank of Uganda’s decision to force a sale of the Kenyan bank’s stake in the Kampala unit is a solution that may come in handy given the damage that the receivership has done to the Imperial Bank brand.

Dr Njoroge said inviting a strategic investor into the bank is one of the options the CBK could use to resolve capitalisation difficulties should the audit reveal that it is a major issue.

“We have to find out whether there any shortfalls in capitalisation and whether the bank can be recapitalised and reopened. Getting a strategic investor is a possible solution,” said Dr Njoroge. The governor also signalled possible fraud at the institution.

Dr Njoroge said that whereas the preference of the CBK was to have Imperial back on its feet, liquidation remains on the cards if the institution’s challenges turn out to be impossible to deal with.

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