First Community Bank has reversed a statement posted early Tuesday acknowledging limitations had been imposed on cheque clearance and withdrawals in response to a regulator recommendation in an attempt to calm clients and prevent a bank run.
The lender claimed in the retracted statement that it is working with stakeholders, including the regulator, to address the situation, which threatens to bring the fourth quarter of Central Bank of Kenya Governor Patrick Njoroge’s term to a close.
The bank customers who lined up to withdraw their cash said the bank is only cashing withdrawals of less than Sh10,000 a day and has placed curbs on cheque clearance.
“We acknowledge that our customers may currently be experiencing challenges in some of their transactions occasioned by panic withdrawals informed by malicious rumors. These unprecedented withdrawals have caused a strain on our daily operations, necessitating the Bank under the guidance of the regulator to limit some services. We are working very closely with all our stakeholders to ensure that we continue to offer good and reliable Shari’ah-compliant banking services to Kenyans,” the bank said.
The bank customers who lined up to draw their cash claimed the bank is only cashing withdrawals of less than Sh10,000 a day and has placed curbs on cheque clearance.
A bank run occurs when large groups of depositors withdraw their money from banks simultaneously based on fears that the institution will become insolvent.
The small tier lender with 0.38 percent market share that ranks 27 among Kenya’s 39 banks had Sh21.5 billion in deposits according to the December 2021 audited reports.
The Bank has assets of up to Sh24.7 billion but Sh17.2 billion or 70 percent of the assets are locked in loans meaning if all customers come for their funds the bank would collapse.
Dubai Bank was placed under receivership in August 2015, followed by Imperial Bank in October of the same year and Chase Bank in April 2016.
The shock collapses saw the regulator step up support for ailing banks while midwifing deals between weak lenders and stronger peers to avoid a repeat of the crash.
Equity Bank recently signed a deal to take over bank accounts of Spire Bank, Cooperative Bank bought struggling Jamii Bora bank and converted it to Kingdom Bank, KCB Group bought National Bank (NBK), while Mayfair was bought by Egyptian Commercial International Bank.
