The Central Bank of Kenya has seized Sh8 billion from disgraced Chase Bank directors who awarded themselves hefty interest-free loans that brought down the mid-tier lender.
Kenya’s banking sector regulator on Thursday said it had confiscated all the prime properties of land irregularly acquired by Chase Bank board members under the guise of sharia-compliant lending.
CBK governor Patrick Njoroge said preliminary audit by CBK shows that the directors had awarded themselves 15-year interest-free loans under the guise of Islamic banking.
“We have to hold these people to account, the population will not accept that they just walk around scot-free,” said Dr Njoroge at a briefing on Thursday.
CBK collateralised these loans to allow for the re-opening of the bank under the management of KCB.
The prime assets forcefully seized include a business park in Karen, a three-acre parking lot in Nairobi, some 240 acres of land on Mombasa Road, a three-acre plot next to the German Embassy on Riverside Drive and various high-end properties in Dubai.
READ: Chase Bank shocks market with Sh8bn secret insider loans
Chase Bank re-opened on Wednesday after it was unexpectedly placed under receivership on April 7 owing to liquidity problems created by a run on deposits.
Those on the bank’s eight-member board are ousted chairman Zafrullah Khan, suspended managing director Duncan Kabui, current chair Muthoni Kuria and CEO Paul Njaga.
Others are lawyer Anthony Gross, businessman Rafiq Shariff, Richard Carter, and French PE firm Amethis co-founder Laurent Demey.
Irregular insider borrowing camouflaged as Musharakah — a sharia compliant financing used by Islamic banks — was previously classified as ‘other assets and interest receivable’ in the balance sheet.
The SME-focused lender also reported a surprise Sh743 million loss for year ended 2015 after re-stating provisions for bad debts.