After the Chase Bank debacle which led to the placing of the institution into receivership last week. The Central Bank of Kenya (CBK) yesterday announced that it will from today avail a facility to any commercial or microfinance bank which will experience liquidity pressures arising from ‘no fault of its own’. This I believe will go a long way in bringing stability to the financial sector in a time when people have lost confidence in it. This means that in case of a run, the bank can still be able to function via the CBK facility this hopefully means that no more banks will close down with depositor’s funds.
[Also read: We have to let Chase Bank go]
The fact that it will only be availed to lenders who face liquidity issues arising from market forces could explain why the same was not extended to Chase Bank before it went down as its directors stand accused of taking out huge loans without any security.
This facility will be availed for as long as it is necessary to the financial institutions in a bid to return stability and confidence to the Kenyan financial sector. While announcing the lifeline to banks CBK also stated that they will continue to monitor and oversee full compliance to laws and regulations. They also assured that firm action will be taken against those found to have abused their powers in the management of financial institutions.