In a special week of June 2006 when music lovers around the world were listening to new banger Hips Don’t Lie by Shakira, the Central Bank of Kenya slammed the doors on Charterhouse Bank, placing the lender under statutory management for what the industry watchdog called “severe violations of the Banking Act.”
On Friday, 23 June 2006, the Central Bank was moved beyond a doubt that Charterhouse Bank had tossed the rule book off the window – literally – in as far as lending, and accuracy of returns submitted to the industry regulator were concerned.
As if that was not enough, Charterhouse bank did not obtain proper account opening documentation for a number of its account holders, the Central Bank said.
According to the Central Bank May 7 statement to the media, the placement of Charterhouse bank under statutory management and subsequent takeover by the CBK was undertaken in the interest of the lender’s depositors, creditors and members of the public in Kenya and beyond.
Fifteen long years ago, as sure as the night follows the day, Charterhouse bank customers could walk into any of debt-saddled Nakumatt Supermarket branches and walk out with a banker’s cheque for school fees or have money wired to their auto dealer for their next dream car.
The bank had ten branches in Nairobi, Kisumu and Mombasa alone.
Eight of these branches were located at locations of the erstwhile Nakumatt Supermarkets, an associate of the bank through common shareholding.
By 2006, Charterhouse bank was classified as a small bank, ranked 30 out of 41 banks with an asset base of KES4 billion, and enjoying a market share of 0.55 per cent of the banking industry in Kenya.
Everything was looking up, the lender was managing 428 loan accounts valued at KES2.9 billion.
Its customers had opened nearly 5,000 deposit accounts, attracting over KES2.9 billion.
But as fate would have it, unbridled ambition and perhaps certainly open disregard to the country’s banking laws saw the lender fly too close to the sun.
The bank’s equivalent ranking at the end of last year measured as per its 2006 asset base would have seen Charterhouse rank as the smallest of all banks in Kenya. How time flies!
Charterhouse was established in 1996 after taking over the operations of Middle East Kenya Finance Limited. Subsequently, the institution converted to a fully-fledged bank in 1998.
In a move that will surely go into history as the last nail on the coffin of Charterhouse, the Central Bank has appointed the Kenya Deposit Insurance Corporation as liquidator of the lender in line with Section 54(1)(b)(v) of the Kenya Deposit Insurance Act, 2012.
This follows the submission of the statutory management report by the statutory manager on May 6, recommending that Charterhouse be liquidated to protect the interest of depositors, creditors, other stakeholders and the wider public.
The liquidation of Charterhouse leaves Imperial Bank as the only other bank in receivership with CBK approving the wind up of Chase Bank in April.