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"id": 601354,
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"speaker_name": "Sen. Billow",
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"legal_name": "Billow Adan Kerrow",
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"content": "Mr. Speaker, Sir, I am ready to issue the statement. I am sure that the hon. Senator is ready to listen because he is a good listener. The statement that was sought by the Senator for Nyeri, Sen. Kagwe, is on the stability of small banks and the alarming interest rates. First, he wanted to know specifically the reason for placing Imperial and Dubai Banks under receivership. He also wanted to know what is causing the alarming rising interest rates and what mitigation action the National Treasury is taking to avoid a financial run in the two banks and the action the Ministry is taking to confirm that small banks in the country are stable. Mr. Speaker, Sir, I have a very brief statement, it is two pages. I would like to very quickly highlight the key areas because the hon. Senator has a copy of the response. We had invited the Governor of the Central Bank of Kenya (CBK) to discuss this matter. There is a very compressive statement that any Member, who is interested, can get. However, very briefly, on 14th August, 2015, the CBK appointed Kenya Deposit Insurance Corporation (KDIC) as the receiver of Dubai Bank because of capital and liquidity deficiencies of the Bank. Mr. Speaker, Sir, the recommendation of the KDIC, with regard to Dubai Bank, is that they recommended liquidation as the most viable option given the magnitude of weaknesses at the Bank. On 13th October, 2015, again, the CBK appointed the KDIC as receivers of Imperial Bank Limited following a submission by the board of the Bank regarding fraudulent activities at the Bank that had come to light after the sudden death of the immediate former Chief Executive Officer (CEO). Mr. Speaker, Sir, the decision by the CBK to appoint the KDIC as receiver of Imperial Bank was taken to protect the interests of depositors, creditors and members of the public. Before receivership, that bank was medium sized. In fact, it was placed at number 16 out of 41 banks. It had a market share of 1.8 per cent. Therefore, the CBK is working with the corporation towards a quick resolution of the bank and the preference or recommendation is to, if possible, revive the bank. The two banks were placed under receivership due to factors that were unique to each of the two institutions. It is not a problem; that is systemic within the financial sector. Therefore, there is no risk of affecting all the banks. Mr. Speaker, Sir, secondly, I should answer the next item which is related to the banks. What mitigation action is the National Treasury taking to avoid a financial run on those banks? Following the announcement of the receivership of Imperial Bank, small and medium sized banks reported panic by their customers who were rushing to withdraw their deposits. This panic was accelerated by social media rumours and circulation of lists targeting mainly small and medium sized banks. The Central Bank of Kenya (CBK) scaled up communication efforts in the following week and they gave announcements to stem this panic and assure the public that the receivership is due to unique factors at Imperial Bank and they are not systemic across the sector. The electronic version of the Senate Hansard Report is for information purposes only. A certified version of this Report can be obtained from the Hansard Editor, Senate."
}