State Finds Solutions for Its 3 Struggling Banks

Since 2008, the plans to merge National Bank, Consolidated Bank, and Development Bank have failed. Before the merger plans, the Privatisation Commission had submitted comprehensive proposals for the sale of National Bank and Consolidated Bank to the Treasury in accordance with the Privatisation Act. However, these plans also stalled.

Therefore, the commission has recently announced plans to restructure Consolidated Bank through a consultant. The restructuring plans are aimed at selling the government’s stake for Sh2.5 billion.

“The transaction adviser is required to prepare a restructuring and options analysis report. The work to be undertaken includes the review of the possibility of implementing a rights issue as part of the privatisation of the bank,” Jaqueline Muindi, acting CEO stated.

National Bank of Kenya could also be sold to Kenya Commercial Bank if a proposal to sell it is approved. In addition, Development Bank will be merged with the following institutions: Uwezo Fund, Kenya Industrial Estates, Women Enterprise Development Fund, Industrial Development Bank of Kenya, and Youth Enterprise Development Fund. The merger will form a large development finance institution.

The three banks have a total capital of KES13.17 billion. The government’s 50.2 percent equity in Consolidated Bank is held through Deposit Protection Fund and its 89.3 percent stake in National Bank is held through Industrial and Commercial Development Corporation.

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