By Kagenyi Lukka
We are yet to get over the menace that was evidently created by the Bank of Uganda (BoU) in the illegal closure and sale seven commercial banks between 1993 and 2017.
These commercial banks are; Teefe, Uganda Cooperative Union, Global Trust, Crane Bank, National Bank of Commerce and Greenland bank.
In this illegal exercise, the central bank under the stewardship of ‘highly trained and experienced’ men and women presided over the most atrocious economic malpractices which depleted many people of their assets,monies,jobs to mention but a few. The most outstanding case was for crane bank limited.
With an asset base of over Ushs.1.2 billion,Dr Sudhir Ruparelia’s bank was donated to a hitherto competitor at meagre cost of Ushs.200 billion.
Crane bank was given away despite the fact that the bank had recovered from the BoU’s assumed liquidity crisis. Therefore, its purported sale can’t and will never be justified.
For instance in the February report by Parliament’s Committee on Commissions Statutory Authorities and State Enterprises (COSASE), It was observed that Crane Bank had recovered from the purported financial distress by the time it was sold.
“The above notwithstanding, at pages 7 and 8 of the special audit report of February 2019 on the accountability for the Shillings 478 billion injected into CBL, the Auditor General observed that CBL liquidity position was significantly below compliance level for the first two months of the statutory management period. However, in the last month of statutory management, from 1st January 2017 to 24th January 2017, CBL met the required liquidity compliance levels. Therefore the bank’s liquidity position had stabilized,” said Katuntu who chaired the Cosase probe into the fraud that characterized sale of defunct banks by BoU.
Crane bank’s bad book
The bad book was also a point of contention in the auditor general’s(Ag) report and cosase’s probe.The Ag noted that he was unable to understand how a book of over Ugx.570 billion was given to DFCU at only Ugx.200 bn.
However in a January 25th, 2017 shocking Letter to Juma Kisaame (sacked DFCU Managing Director), titled Compliance Accommodations, Justine Bagyenda the former Executive Director for Commercial bank supervision exhorted the sacked Managing Director to treat the bad book clandestinely!
“The assets acquired and liabilities assumed will be reported separately from the DFCU’s balance sheet for the 31st January 2017 end of month reporting to BoU. The first consolidated balance sheet will be that of 31st march 2017,” Bagyenda’s order reads.
Bagyenda further ordered that any acquired performing loans and advances reflected on Dfcu’s balance sheet at integration will be deemed and treated as new to Dfcu and hence eligible for restructuring for purposes of the financial Institutions (credit classification and provisioning requirement.
She then added that all fully provisioned loans and advances acquired by Dfcu will be ring-fenced and managed separately and would not be part of Dfcu’s loan portfolio for reporting purposes until rehabilitated in conformity with the Financial Institution Act.
It should be noted that One of the factors Bank of Uganda raises that catapulted to the closure of Crane Bank was the under performing loans that resulted to liquidity crisis at Crane Bank.
However, as a requirement, Sudhir had deposited over Shs.200 billion as security which was used to clear depositors.
This means, Sudhir’s account in Bank of Uganda has been eroded and he could only recover the money through accessing the bad loan book.
Speaker’s directive on re-examination of closed banks should not be selective
The Speaker of Parliament, Rebecca Kadaga in a letter of 26th July 2019 instructed the Committee on Commissions, Statutory authorities and State Enterprises to look into a petition lodged by a one Chris Tushabe that the bank probe into the sale of commercial banks did not comprehensively handle the bank’s issues.
“I will formally inform Parliament about the need to complete the hearing,” Kadaga wrote in a letter addressed to COSASE chairperson, Mubarak Munyagwa and to Nandala Mafabi, the chairperson of the Public Accounts Committee.
Among other unresolved key issues, the Cooperative bank wants Parliament to compel Bank of Uganda to produce the liquidation report and other vital documents that were seized when the 1997 bank was closed.
Whereas the speaker’s directive to the committees is understandable as the reexamination will take place in the 4th Session of parliament(new session),Crane bank owners/shareholders deserve justice and should be listened to if a comprehensive re-examination of the sale of defunct banks is to make meaning.
The contest of on a sticking matter such as the crane bank’s bad book as above explained needs to be expounded a lot more than what happened.
The author is a current affairs analyst and aspiring MP Ikiiki County in Budaka district.