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New Auditor General’s report faults BoU on sale of Crane Bank, closure of 6 other banks

A report sanctioned by the Auditor General (John Muwanga) has faulted Uganda’s bank regulator, Bank Of Uganda, for the takeover and shutdown of Crane bank and other 6 financial institutions (FILE PHOTO)

KAMPALA – A new Auditor General (AG)’s report has thrown a spanner in the works after revealing that Bank of Uganda (BoU) did not follow the lawful procedures in the closure of Crane Bank and six other commercial banks.

The special audit was solicited by the Parliamentary Committee on Statutory Authorities and State Enterprise (COSASE) to guide a wider investigation the committee intends to carry out on the controversial sale of Crane Bank, formerly owned by tycoon Sudhir Ruparelia, and the closure of Teefe Bank, International Credit Bank Ltd, Greenland Bank, The Co-operative Bank, National Bank of Commerce and Global Trust Bank.

And the 94-page report, which was submitted to Parliament on Wednesday, indicates that BoU did not follow any guidelines/regulations or policies in the sale of Crane Bank to dfcu Bank last year and in the closure of the other banks.

“I observed that there were no guidelines/regulations or policies in place to guide the identification of the purchases of the defunct banks. There were also no guidelines to determine the procedures to be adopted by Central Bank in the sale/ transfer of assets and liabilities of the defunct banks to the identified purchaser,” the AG report reads in part.

The AG, Mr John Muwanga, also said the Central Bank did not carry out an evaluation of the assets and liabilities of Crane Bank before they were transferred to dfcu Bank.

“On April 10, 2018, I requested for P&A agreement, including details of the assets and liabilities transferred after taking into account the requisite valuation. I noted that BoU did not carry out a valuation of the assets and liabilities of CBL. In the absence of the valuation, I could not establish how the terms for the transfer of assets and liabilities in the P&A were determined,” Mr Muwanga’s report reads in part.

Recently, Meera Investments dragged Dfcu Bank to the Land Division of the High Court, seeking to reclaim its 46 branches which it says were acquired illegally following the dissolution of Crane Bank. The closure of Crane Bank saw Dfcu bank become the third biggest bank after acquiring 46 branches from the financial institution.

Meera, in its lawsuit, claims that at the time BoU took over the management of then Crane Bank in October 2016 before its eventual sale to DFCU, it was the leaseholder of the suit properties and paying $6,000 every beginning of the year.

The AG’s report has also raised questions on how BoU signed a Purchase of Assets and Assumption of Liabilities agreement with Dfcu on January 25, 2017, for the purchase of Crane Bank.

“I was not provided with the negotiation minutes leading to the P&A agreement. In the absence of the minutes, I could not determine how BoU selected the best-evaluated bidder and how the terms in P& A were determined. I also noted that the P&A did not have complete details of assets and liabilities transferred to dfcu with their corresponding values; I was, therefore, unable to establish the status of assets and liabilities transferred to dfcu,” the report adds.

Aggrieved Crane Bank shareholders have already threatened to sue BoU, saying the January 25, 2017 sale agreement was signed by BoU Governor Emmanuel Tumusiime-Mutebile and Mr Juma Kisaame, the managing director of dfcu Bank, without considering the interests of major shareholders of the defunct bank.

The AG has also questioned the source of Shs478.8b the Central Bank injected into Crane Bank in 2016 to keep it liquid.

Speaker Rebecca Kadaga forwarded it to the Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) for discussion and further study.

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