“Malicious” posts on Twitter are being blamed for Chase Kenya being placed under creditor protection following a run on deposits.
According to Central Bank of Kenya Governor Patrick Njoroge, “malicious comments” on social networks including Twitter and WhatsApp Inc. were at least partly to blame, writes Eric Ombok for Bloomberg.
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Social media comments lead to run on deposits
“We had some individuals that shouted fire in a crowded theater room; to me there is nothing as reckless as that,” he told reporters. “If one made such horrendous statements, you can cause a run, some crisis. Indeed the bank was under serious pressure.”
A number of comments on social media caused concern about the financial health of Chase Kenya. Chairman Zafrullah Khan and Managing Director Duncan Kabui recently resigned also resigned recently.
Further tension was caused by news that auditors had found that Chase Kenya earnings had been restated.
“Rumors 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.
Chase Kenya third lender taken over by regulators since last June
Kenyan Twitter users have been using the hashtag #KOT (Kenyans on Twitter) to communicate with each other. Nation FM radio presenter Mumbi Seraki posted that Chase Bank funds were missing due to alleged fraud.
She later posted: “It’s not the #PowerOfKOT that brought #ChaseBank down but poor financial decisions & abuse of office!”
Commentators such as Dr. Fly of iBank Coin believes that authorities are disturbed by the fact that Kenyans are using social media to communicate with each other. He claims that Kenyan authorities are corrupt.
The bank governor blamed “inaccurate social media reports” for the problems. Njoroge claimed that there were no signs of fraud.
Opinion is divided on the bank with some customers posting stories about satisfactory service. However withdrawals continued, with some users posting photos of ATMs that weren’t working and complaining that they couldn’t take their money out.
According to Njoroge Chase Kenya will restart operations as quickly as possible. Shareholders are willing to inject liquidity and will cooperate with authorities in order to get the bank working again.
After the appointment of Njoroge as governor of the central bank in June two other lenders have also been taken over by regulators, making Chase Bank the third. Problems have arisen as smaller lenders struggle for liquidity with larger banks and non-performing loans increase.