April 8, 2016 / 3:33 PM / in 2 years

Kenyan police seek bank execs; minister calls financial system 'sound'

NAIROBI (Reuters) - Kenyan police ordered the arrests of eight bank executives on Friday, a day after the latest in a series of troubled banks was put into receivership, but the country’s finance minister insisted the financial system was “very sound”.

The logo of Chase Bank is seen on the closed entrance of one of its branches, after the bank was put under receivership, in Nairobi, Kenya, April 8, 2016. REUTERS/Siegfried Modola

Mid-sized Chase Bank Kenya was the third lender to be taken over by the central bank in nine months, fuelling worries over the health of the sector, whose gross non-performing loans rose sharply in volume last year.

Central bank Governor Patrick Njoroge said authorities would deal firmly with bankers who put depositors’ money at risk, as the police issued arrest warrants for six executives of National Bank and two from Chase Bank.

“We want to take this opportunity to assure the members of the public that Kenya’s financial system is very sound,” Finance Minister Henry Rotich told a news conference on Friday, flanked by Njoroge and other officials.

Rotich said the ministry was working closely with the central bank to isolate and contain the impact of the troubled banks on the financial system.

Mid-sized Imperial Bank was taken over in October, two months after the smaller lender Dubai Bank.

“The government is very supportive of the actions the central bank took,” Rotich said.

“We are continuing to enhance banking supervision.”

The central bank on Thursday put Chase Bank under a 12-month receivership following a run on deposits sparked by fears over the health of the lender’s finances.

Njoroge said authorities would be tough with bankers who flouted rules.

“We cannot tolerate rogue bankers, those who in effect steal from depositors,” he said.

Last week the chief executive of National Bank, Munir Ahmed, was put on compulsory leave pending an internal audit, as loan loss provisions pushed the lender into a loss.

Police Inspector General Joseph Boinnet said in a statement that National Bank’s CEO, Chase Bank’s former managing director, its former chairman, and the five other National Bank executives would be arrested unless they presented themselves.

Kenyan lenders’ gross non-performing loans jumped to 6.8 percent of the total loans in February, from 5.7 percent in the same month last year, amid increased defaults.

Njoroge said that did not pose a systemic risk as banks had made higher provisions for the rising bad debts, which led to an erosion of their earnings for last year.

Editing by Andrew Roche

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