The Central Bank of Kenya has come out to assure investors of stability in the banking sector after local banks took a hit from Tuesday’s Imperial Bank closure.
Shares of most Nairobi-listed lenders closed lower on Tuesday with the entire banking sector recording declines except for I&M Bank-which did not trade.
BANKS HIT
NIC Bank, Standard Chartered and Housing Finance declined the most; falling 6.7 per cent, 5.5 per cent and 4.4 per cent respectively.
Kenya Commercial Bank weakened towards close of the session and touched a 52 week low of Sh40.50 as local investors picked up the stock as it fell, Standard Investment Bank said in a note to clients.
According to Bloomberg the decline continued for a second day running (Wednesday) with the biggest lender, Equity Group seeing stocks tumble 6.3 per cent to 40.75 shillings by 10:14am heading for its biggest drop since September 2014.
Co-Operative Bank has slid 3.9 percent, Barclays Bank of Kenya Ltd is down 2.4 per cent and Kenya Commercial Bank has fallen 3 per cent in today’s trading.
CBK released a second statement jointly with Capital Markets Authority (CMA), clarifying the problems at Imperial Banks had been brought to its attention by the bank’s board of directors.
The statement signed by CBK Governor Patrick Njoroge and CMA CEO Paul Muthaura, further clarified that the action was meant to stop the listing of the Sh2 billion bond that was meant to start trading on Tuesday.
CMA ACTION
CMA directed the Nairobi Securities Exchange to suspend the introduction to listing and trading of the Corporate Bond issued by Imperial Bank which closed on September 17, ‘in the Public interest and to protect interests of investors’.
“The board of directors of Imperial Bank Limited brought to the attention of the CBK inappropriate banking practices that warranted remedial action in order to safeguard the interest of both depositors and creditors,” the statement read.
CBK sought to assure members of the public that ‘Kenya’s banking sector remains safe and robust’.
DUBAI BANK
Closure of two banks under the four months the new CBK governor, Dr Patrick Njoroge, has been at the helm have sent fears that more financial institutions could face regulatory action.
Dubai Bank was put under the management of the Kenya Deposits Insurance Corporation in September setting the stage for a new CBK era where banks will come under tighter scrutiny.
Last month, Dr Njoroge, in his first address to the media, warned financial institutions of manipulating the forex and money markets through collusive tendencies.
The governor noted that market indiscipline was partly to blame for the decline of the shilling and insisted on strict adherence to the rules by financial institutions and greater oversight on to curb the vice.
By OTIATO GUGUYU
