A retail bank in Kenya has been placed under receivership after running into financial difficulties.

Panic withdrawals on Wednesday, caused by "inaccurate" rumours on social media, led to a run on Chase Bank, said the Central Bank of Kenya (CBK).

Its branches were shut on Thursday. The bank is the third to be placed under the CBK's control in the past year.

Chase had recently released two conflicting financial statements, a BBC reporter says.

A subsequent audit showed it had hidden loans to its directors, adds the BBC's Ferdinand Omondi in the capital, Nairobi.

In a statement, the CBK said it would appoint a team to run the bank.

The team would be given 12 months to come up with an "appropriate resolution strategy", said a CBK statement.

One depositor told the BBC that he had $100,000 (£70,000) at Chase, and he had no idea whether he would get the money back.

Hundreds of customers flocked to Chase branches and ATM machines countrywide to withdraw their cash on Thursday, only to find them closed, our reporter says.

All 62 of its branches would remain closed until new management was put in place, said CBK chief Patrick Ngugi Njoroge.

He insisted that the banking sector in Kenya, East Africa's biggest economy, was stable, despite the banks going into receivership.

Chase is a mid-sized bank with a mixture of low- and middle-income customers, as well as wealthy businessmen who trade with firms in the Middle East.

It also has a unit which specialises in Islamic finance.

On Wednesday, Chase dismissed its chairman and group managing director following the release of two conflicting financial statements.

One of them had downplayed the bank's internal loans, says our correspondent.

An audit later showed the bank had loaned its directors $80m, and its bad debts had skyrocketed to $100m.

The bank posted a profit of $23m in 2014, only to record a loss of $7m the following year.

The African Development Bank, which last week agreed to lend Chase $50m for onward lending but had not disbursed the funds, said the receivership would not stop it from supporting the sector.

"The African Development Bank remains confident about the stability of the financial sector in Kenya," its regional boss for East Africa, Gabriel Negatu, told Reuters news agency.

Source:
courtesy of BBC NEWS

by BBC News

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