The financial crisis that has ravaged Spire Bank requires swift intervention by the Central Bank of Kenya (CBK) to avert fears over the health of the Kenyan banking sector.
Over the past two years, Spire Bank’s accumulated losses of up to 8.4 billion shillings have wiped out shareholder funds, which now stand at 1.8 billion shillings negative. It remains in violation of CBK minimum capital levels, endangering shareholder investments and customer deposits of 4.79 billion shillings.
This state of affairs does not fit well with the latest pressures from banking regulators to strengthen stability in the sector.
CBK recently led the consolidation, leading to the acquisition of weak lenders such as Jamii Bora Bank and National Bank (NBK) by Co-operative Bank and KCB Group in that order.
To survive, Spire Bank needs additional capital to resume the growth of its loan portfolio, and this can only happen by selling the lender to credible strategic investors.
Already, teachers at Mwalimu National Sacco poured at least 4 billion shillings of their hard-earned savings into the ailing lender in a rushed purchase of the bank from businessman Naushad Merali in 2015.
The CBK has a duty to protect these innocent investors to whom we owe an explanation as to whether they have been sold to a dead bank.
The current parliamentary investigation must seek to establish whether the purchase was flawless.
The culprits must be punished if infringements are discovered.
Depositors and investors in Kenya were rocked five years ago when CBK took control of three midsize lenders after failing to meet their statutory obligations.
Of the three lenders placed in receivership in 2015 and 2016, Dubai Bank is threatened with liquidation.
However, Chase Bank and Imperial Bank saw their good loans and deposits transferred to the State Bank of Mauritius (SBM) and KCB respectively.
These events have undermined the confidence of depositors and investors in small banks.
Yes, Spire Bank is committed to calling on strategic investors. We’ve been here before, and the strong hand of the CBK should strike a deal and fix the Spire Bank mess.