Dubai Bank sinks under debt and violating regulator rules


The Central Bank of Kenya has placed Dubai Bank under receivership after the lender failed to repay money borrowed from other financial institutions to keep it afloat.One of the Dubai Bank branches in Nairobi’s central business district on August 14, 2015. The lender was placed under receivership by the banking regulator for failing to meet cash ratio rules. PHOTO | JAMES EKWANAnnouncing the move, Central Bank said the action was taken “in the interest of its depositors, creditors and members of the public.” Kenya Deposit Insurance Corporation (KDIC) was appointed as the receiving manager for a year.

The move leaves the future of the lender in limbo. The bank, whose principal shareholder is Mr Hassan Zubeidi, who doubled up as the bank chairman, has been unable to repay the Bank of Africa Sh48.18 million.

CBK said Dubai Bank had violated banking regulations by keeping inadequate capital and was facing imminent collapse.

The regulator said the lender has been experiencing serious liquidity and capital deficiencies which have raised concerns that it may collapse any time. The bank had been issued with a banking licence in April 2000.

CBK further pointed out that it has been in contact with the small lender in a bid to correct the mess but there has been no compliance as its cash reserve ratios (CRR) have continued to deteriorate.

The bank began breaching the daily CRR – 5.25 per cent of its deposits that it must keep with the CBK – from July 14, 2015, tightening the regulator’s scrutiny on the lender. The appointment of a receiver is meant to prevent the bank from collapsing with funds of its depositors and creditors.

Dubai Bank follows Charterhouse Bank in financial institutions recently placed under receivership. In 2006, the CBK closed down Charterhouse over accusations of money laundering.

Since 2012, Dubai Bank has been in the news for failing to honour its debts and fallout between top managers. A former managing director, Nereah Said had in 2012 made revelations regarding a series of irregular transactions at the bank that threatened to put at peril nearly Sh2 billion in customer deposits.


Ms Said, whom was fired in November 2012, claimed that weak governance structures abetted by Mr Zubeidi had exposed the bank to extensive fraud and theft of funds.

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