How Family Bank lost Sh23 billion in five days

Family Bank Managing Director David Thuku.

On November 16, 2016, a man walked into a Family Bank branch and demanded to withdraw Sh8 million that he had saved overthe years. This was after rumours spread on social media that the lender would be closed by the Central Bank of Kenya (CBK).

He was not taking no for an answer from the frantic managers who were trying to calm thousands of customers who, like him, wanted their money.

Three financial institutions — Dubai, Imperial and Chase banks — had been placed under receivership. Going by past incidents where depositors wait for long to be paid or only got a fraction of their savings when lenders were placed under statutory management, this time, customers wanted their money before things got worse. For Family Bank, this particular client camped at one of its two branches that stay open till 8pm, waiting to get his cash.

Eventually, he left the bank on night of November 16 with Sh8 million in cash but realised his mistake when he spotted other people and started imagining they were after him.

“He started feeling very scared. So he weighed his options: ‘If I go home these fellows will take the money, if I go back to that bank, they say it is going to shut, now what do I do?’,” a more reassured Family Bank CEO David Thuku, told Weekend Business.

The man, terrified, scampered back into the banking hall and offered Family Bank managers a deal. They could take the money, but only if they did not put it in the bank’s system.


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“So he went home and came back early the following day because he feared that if he delayed, he might find CBK inside. He found the cash intact. After staying in the bank for an hour, hedecided to redeposit the cash,” Mr Thuku said.

Thuku was a man under siege for five days during which the bank he had overseen for barely a year lost more than Sh23 billion in one of the worst bank runs in Kenya.

He admits that deposits went down from Sh62 billion to Sh39 billion in under a week.

“Someone would tell us, we lost money in Chase Bank, we lost money in Imperial, so we understood. Like fund managers, if you are investing on behalf of people and the money goes, you get fired, so we understood and said, ‘You come take your money but we are not going anywhere, when you see that, please bring back the money’,” he said.

It is easy for Thuku to talk about those dramatic five days now that Family Bank is firmly back on track. Although their net profit fell 82 per cent to Sh352 million due to the bank run, the lender is the recovery path. During the crisis, customer deposits dropped to Sh39 billion but rose to Sh41 billion as at December 2016.

Sacked managers

Family Bank’s problems started a few months earlier after CBK unravelled a scheme where National Youth Service (NYS) money was wired through the lender. It was later fined Sh1 million. Faulu Micro Finance Ltd and Sidian Bank, formerly K-Rep, also had to part with Sh1 million fine each.


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The bank sent home nine members of staff alleged to have been culpable in the laundering scheme that cost taxpayers over Sh1 billion.

The bank’s boss, Peter Munyiri, left in June last year, having served the bank for five years. Mr Munyiri would later join his former colleagues in the dock for failing to report the infamous Josephine Kabura and Ben Gethi transactions.

“I am not worried much that our name will keep coming up over the NYS issue. In life, there are things that will hit you. Some will hit you unexpectedly, some will hit you because of some negligence you have done somewhere. You pick your lessons for the things that hit you and then do the corrective measures you need to do,” Thuku said.

The image of the agony of depositors waiting for their money outside Imperial Bank and Chase Bank was still fresh in the minds of depositors, and Family Bank was expected to follow the three lenders into the wasteland.

When Thuku walked into his office at 7am on November 17, he called CBK Governor Patrick Njoroge, who was rumoured to be on his way to shut down the lender.

“The governor said, ‘If I am going to shut you down, would you be seeing texts or would you be finding my people at your door ready to shut you down? So obviously there is no truth about the texts. But you need to convince your customers that I am not going to shut you down because if they believe that and come, I will have no choice but to come running and shut you down’,” Thuku recalled.

He asked the governor then to send out a strong statement to counter the rumour, but Dr Njoroge advised against it. He had done that for Chase Bank and the next thing he knew, they were down.


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“He said if he comes out, he might actually make the situation worse,” Thuku said.

He added that he knew he had to talk to customers and convince them not to withdraw their money.

“We did this for a whole week.”

The bank informed staff to calm depositors. They brought in the chairman of the board, Wilfred Kiboro, and started contacting depositors.

“Our phone batteries were dying. We had to recharge them to keep calling customers and tell them the rumours were not true,” Thuku said.

“I spoke to a man who had about Sh40 million in his account and he told me, ‘Please, I have known you for 15 years, tell me the truth. Is the bank closing down?’

“I told him we are not going anywhere. He was under so much pressure because his wife was calling him constantly and telling him not to go home if he had not withdrawn their money.

“I told him, ‘If you remove the money, you will actually make the bank collapse’. He understood the logic, but his wife was telling him that if the money got lost … Now you see how I was standing between a divorce.”

Thuku says the man went to his office and told him he had heard there was a crisis meeting the bank was having with the governor.

“He started assisting in calling other customers to tell them he is in the bank and everything is normal. So the connection with customers is very important,” Thuku said.

The bank put out press briefings to assure the market that things were fine. Thuku also went to Family Bank branches to help reassure staff and talk directly to customers and serve them as a teller.

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