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Crane Bank ghost back to haunt BOU as Auditor General pins officials over lack of transparency

A new report released by the Auditor General has pinned Emmanuel Mutebile’s BoU on the sale of Crane Bank and six other financial institutions (FILE PHOTO)

KAMPALA – The Bank of Uganda (BOU) finds herself in the spotlight following the Auditor General’s damning report on the sale of Crane Bank and six others.

As the regulator of Uganda’s banking sector, the BOU never took efforts to revive Crane Bank Limited (CBL) after taking it over, Mr John Muwanga the AG has said in his new report.

Crane Bank was placed under statutory management from October 20, 2016, to January 20, 2017.

“During this period, the Statutory Manager did not prepare a plan detailing efforts to return the bank into compliance with prudential standards despite BOU injecting Shs 478.8 billion to support the operations of Crane Bank,” the Auditor General report on seven banks reveals, unilaterally closed by the central bank says.

“In absence of any documented assessment to revive the bank, I could not provide assurance as to whether Sections 89(5) and 90(a)(c) of the FIA (Financial Institutions Act) 2004 was complied with,” Mr Muwanga said.

Section 89 (5) of FIA states that “the Central Bank shall exercise statutory management over a financial institution for the minimum time necessary to bring the financial institution into compliance with prudential standards”, while Section 90 (a) (c) of the same act talks about the duties of the statutory manager, saying “..tracing and preserving all the property and assets of the institution… evaluating the capital structure and management of the institution and recommending to the Central Bank any restructuring or re-organization which he or she considers necessary and which, subject to the provisions of any other written law, may be implemented by him or her on behalf of the institution.”

After taking over Crane Bank, BoU appointed Edward Katimbo Mugwanya as the Statutory Manager.

The Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) in November 2017 requested the Auditor General, John Muwanga to undertake a special audit on the closure of commercial banks by Bank of Uganda.

The seven banks audited included Teefe Bank, International Credit Bank Limited (ICBL), Greenland Bank, The Cooperative Bank, National Bank of Commerce (NBC), Global Trust Bank (GTB) and Crane Bank Limited (CBL).

The report reveals that the Statutory Manager prepared the Crane Bank annual report and financial statements for the year ended December 31, 2016, but these were neither signed by BOU nor the auditors.

“I was therefore unable to ascertain the financial performance of Crane Bank during statutory management and its financial position as at 25th January 2017. As such, I was also unable to establish the details and values of assets and liabilities transferred to DFCU,” says the report.

The BOU sold Crane Bank, the then 4th largest bank in the country to the dfcu bank on February 27, 2017, at a fee later to be discovered as a paltry Shs 200 billion.

However Former Crane Bank shareholders led by majority shareholder Sudhir Ruparelia and family have since dragged the Bank of Uganda (BoU) to court, claiming their bank was sold to dfcu without considering their interests in accordance with the Financial Institutions Act.

Dfcu is currently the second largest bank in Uganda after Stanbic with an asset portfolio of Shs3 trillion, after the acquisition of Crane Bank but the bank has suffered public scrutiny following the controversial deal.

Dfcu has been hit with shareholder troubles after some of the bank’s European shareholders elected to pull out.

dfcu is partly owned by the Commonwealth Development Corporation (CDC), a British government-owned company, together with Rabo Development from the Netherlands and NorFinance from Norway, who are shareholders in Arise B.V together with Norfund, a Norwegian government-owned Private Equity firm and FMO, the Dutch Development Bank. The CDC has elected to leave the shareholding arrangement.

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