BoU fails to explain Crane bank evaluation report

Kampala, Uganda | THE INDEPENDENT | Bank of Uganda officials have failed to justify the absence of an evaluation report of the assets and liabilities of Crane Bank Limited before its sale to DFCU.

The irregularity was queried by the Auditor General in his 2017 forensic audit report. According to the report, the Central Bank relied on the due diligence done by DFCU to determine the value of assets and liabilities contained in the Purchase and Assumption agreement signed by DFCU.

The Central Bank officials led by Governor Emmanuel Tumusiime Mutebile and Deputy Governor Louis Kasekende on Friday appeared before the committee on Commissions, Statutory Authorities and State Enterprises (COSASE) which is currently investigating circumstances under which seven commercial banks were closed and sold between 1993 and 2016.

Ben Sekabira, the Director Financial Markets Development Coordination argued that the Central Bank relied upon an inventory report by Pricehousewatercoopers (PWC) noting that it was a good basis to determine the value of the most important assets of the bank.

This argument was criticized by COSASE Chairperson Abdu Katuntu who read out section 95 (3) of the Financial Institutions Act which mandates any Bank receiver to carry out an evaluation before sale.

In addition, Katuntu stated that the purchase of assets and assumption of liabilities agreement with DFCU was signed in January 2017 and therefore BOU could not rely on an inventory report done in October 2016.
Mbarara Municipality MP Michael Tusiime also pointed out that PWC had even placed a disclaimer on the inventory report as to the accuracy of the figures given that they had only worked with data they had been forwarded.

Even with the provisions in law, the Central Bank was unable to provide a satisfactory explanation for the gross irregularity.

Legislators also questioned the decision by BOU to enter into a purchase of assets and assumption of liabilities agreement with DFCU for deferred payment of 200 billion shillings by DFCU for Crane Bank’s loan portfolio. The money was supposed to be paid in instalments in 36 months.

Central Bank Board Member Judith Obitre Gama noted that the board got to know about interest not being charged after the agreement had been signed but was told by management that the interest would be paid by the shareholders of Crane Bank Limited in liquidation.

MPs learnt that BOU agreed that DFCU would pay for the value of the loan portfolio from loan collections.

Gama’s answer agitated MPs who questioned the legality of charging Crane Bank shareholders for interest on money owed by DFCU.

Katuntu and Busiro East MP Medard Lubega Seggona were left baffled by a move from the Central Bank to waive charging DFCU interest and instead charge it on the shareholders.

The committee learnt that out of the 200 billion shillings loan, DFCU has so far paid BOU Shillings 98.9 billion.

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