Governor of the Central Bank of Kenya (CBK), Patrick Njoroge, backed Equity Bank’s contentious purchase of Spire Bank.
Members of the National Assembly’s Finance and National Administration Committee accused him of conspiring to bring down the loss-making bank owned by Mwalimu Sacco Limited by reportedly “sleeping on the job and failing to rescue” it.
Mwalimu Sacco Limited would pay Equity Bank Sh422 million as part of the acquisition transaction, a liability and asset purchase that committee members claim is bad for the teachers-owned bank despite Dr. Njoroge’s assertion that the Sacco cannot prevent the bank from experiencing liquidity problems.
Interestingly, despite the loans being secured, the bank’s loan book has been discounted at 13 percent.
According to Dr. Njoroge, the bank loses Sh100 million annually, or Sh1.2 billion year, to the committee led by Molo MP Kimani Kuria.
Since the teachers purchased the bank in a process that began in 2014 and ended in 2016, it has lost a total of around Sh13.5 billion in the savings that the teachers worked so hard to accumulate.
The bank’s losses come from the payments it makes on the Sh2 billion in customer deposits, which much surpass the loans, some of which are non-performing.
The loss-making bank has seen a significant increase in its non-performing loans from Sh1.3 billion to the current Sh2.7 billion.
What is emerging is that CBK enabled the teachers’ bank to fail. Mr. Ariko remarked, “He has offered no proof to prove that CBK assisted it. Ms. Kassim was similarly perplexed as to how CBK contributed to the stability of the Spire bank.
“The sequence of the events leading up to the acquisition of the bank is what you have broken down for us. You haven’t explained to us what you did to assist the bank in resolving its problems, Ms. Kassim added.
Adan Keynan, an Eldas MP and member of the committee, stated that the challenges affecting Spire bank demand the Cabinet’s participation and are not as straightforward as the CBK boss may want the MPs to believe.
A national conversation and the Cabinet’s intervention are necessary in the Spire Bank issue. As a regulator, it is your responsibility to safeguard customer deposits, but it appears that you have done nothing. Customers would soon be rushing to withdraw money from the bank, predicted Mr. Keynan.
David Mboni, a Kitui Rural MP, also charged CBK with indifference to the problems Spire Bank is having.
There are two organizations that oppose the Teachers’ Bank’s existence. They are CBK and Mwalimu Sacco limited. This is, in my opinion, the worst offer ever. While CBK wants to have the bank, Mwalimu Sacco wants to give it away for free and even pay for it.
The head of CBK also disclosed that the industry regulator now has Sh700 million available in cash to swap for Treasury Bills from Spire bank.
Contrary to assertions to the contrary, CBK has not injected Sh1.7 billion in transactional expenditures. At least 1,200 of the members of Mwalimu Sacco are educators.
The bank lost Sh1.2 billion in total last year, and as of June this year, it had already lost Sh600 million. Dr. Njoroge has warned that unless the Equity takeover deal is expedited, the hard-earned money of the teachers will continue to be lost in interest payments to the customer deposits.
Dr. Njoroge yesterday assured the committee that even if Equity joins the company, the bank’s employees wouldn’t lose their employment.