#KOT, or Kenyans on Twitter, are being blamed for a run on deposits that resulted in Chase Bank Kenya Ltd. being placed under creditor protection by the East African country’s regulators on Thursday.
Central Bank of Kenya Governor Patrick Njoroge said “malicious comments” on social media were part of the reason the lender was placed under receivership. “We had some individuals that shouted fire in a crowded theatre room; to me there is nothing as reckless as that,” he told reporters in the capital, Nairobi.
“If one made such horrendous statements, you can cause a run, some crisis. Indeed the bank was under serious pressure.” Chase Bank on Wednesday sought to assure customers that it was operating normally as a flurry of comments on social-media sites speculated on the financial health of the company.
Rumours on the safety of deposits and investments mounted following the resignation of Chairman Zafrullah Khan and Managing Director Duncan Kabui, and concern over a qualified opinion expressed by auditors on earnings that had been restated to show a surge in loans to employees and directors.
“Rumours have been rife on social media which is turning out to be a pre-eminent early warning system,” Aly-Khan Satchu, chief executive officer of Rich Management, an adviser to companies and wealthy individuals, said in response to e-mailed questions.
Kenya had the highest number of tweets in Africa after Egypt, Nigeria and South Africa in 2015, London-based Portland Communications said in a report released April 6.
The central bank stepped in on Wednesday and worked through the night as Chase Bank experienced liquidity difficulties because of “inaccurate social-media reports,” the central bank governor said.
The company’s shareholders will inject liquidity into the bank and are committed to working with regulators to reopening quickly, he said, adding that there was no evidence of fraud.
No Twitter comment
Investors in Chase Bank include Amethis Finance SAS, a Paris-based company focused on investing debt and equity in Africa, Zurich-based responsAbility Investments AG, and KfW, the German development-finance group, according to an April 2015 document published on the lender’s website. Andreas Grenacher, regional director of KfW’s East African operations, didn’t immediately respond to e-mailed questions. Ulli Janett, a spokeswoman for responsAbility, said the company will comment later.
Twitter doesn’t comment on individual accounts, the company said in an e-mailed reply to questions. Chase Bank Chief Executive Officer Paul Njaga didn’t answer several calls to his mobile phone on Wednesday and Thursday.
Chase Bank is the third lender be taken over by regulators since Njoroge was appointed as governor of the central bank in June as the country’s smaller financial institutions struggle for liquidity against larger peers and non-performing loans climb, with not enough money set aside to cover potential losses.