SAD: Kingdom Bank sinks Co-operative bank’s Ksh 2.5 Billion

The near collapse of Co-operative Bank of Kenya has pointed the finger at its ill-fated merger with the Jamii Bora Bank, a run-down loss making institution with insiders claiming it ‘would never have happened’.

SAD: Kingdom Bank sinks Co-operative bank's Ksh 2.5 Billion

An ignored report by Central Bank of Kenya (CBK) insiders: “This report tells a sorry story of failings in management and governance on many levels.”

A former National Treasury mandarin was asked to investigate after the bank was found to have Sh2.5 billion hole in its balance sheet which ultimately required a rescue by shareholders.

“The Sh2.5 billion black hole has resulted from an institutional shortfall following the purchase of Jamii Bora bank and the propping of Gideon Muriuki’s personal initiative from what was Kingdom Securities to now Kingdom Bank,” says the report in part.

The same can be said of Mayfair Insurance Brokers and later Mayfair Bank associated with former Gatanga MP Peter Kenneth.

His long-awaited report found “overwhelming” evidence that former Cooperative Bank chairman Stanley Muchiri and CEO Gideon Muriuki, who took over as boss following the 2008 IPO, failed to leave the new business “in a good position” when he departed in 2020.

Muchiri and Muriuki have been accused of many bad things in the country’s third biggest bank, including breeding corruption, tribalising the bank and even manipulating contracts and tenders to benefit certain aspects of the bank and its business outlook.

It also said the culture of the bank was partly to blame, with a “willingness to accept poor performance” and a “tendency not to welcome challenges”.

The board of the wider Co-operative Group, led at the time by Stanley Muchiri, also came in for criticism for failing properly to oversee the bank and badly letting down the group’s millions of members.

The report said: “The roots of the shortfall lie in a merger between the bank and the Jamii Bora Bank which should probably never have happened.

“Both organisations had problems. Bringing them together exacerbated those problems. It might have worked if the merged organisation had first class leadership. Sadly it did not.”

As well as the merger with the Jamii Bora, at the time Kenya’s bottom ranked banking institution, the report focused on a disastrous attempt to update the banking group’s IT systems.

An abortive attempt to buy 60 branches from Mwalimu Sacco, was also examined, along with attempts to bring the business closer to the wider Cooperative Bank in a process called Kingdom Group of Companies, a personal initiative of Muriuki.

The report scrutinised the bank’s management of its loan book, approach to risk management and capital, as well as its involvement in the payment protection insurance mis-selling scandal that caught up much of the wider sector.

The report was based on more than 130 interviews with current and former employees, board members and others, and examination of internal papers and external reports.

The report said: “The Co-operative Bank executive management failed in its oversight of the executive.

“The group board failed in its duty as a shareholder to provide effective stewardship of an important member asset. Collectively they badly let down the group’s members.

“The lessons we set out are far from novel. It does no credit to those involved that they must be learnt again.

“I hope my report will help the group and the bank in their efforts to rebuild organisations of which their members and customers can once again be proud.”

The bank analysts revealed that the only member or former member of the Co-op group or bank leadership who declined to meet him was disgraced former bank chairman Erastus Muriithi, a former MP in the National Assembly, whose lack of strategic management on the job has been widely criticised.

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