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Crane bank closure was illegal - Cosase

Abdu Katuntu presents the Cosase report before parliament

Abdu Katuntu presents the Cosase report before parliament

The closure of Crane bank by Bank of Uganda was illegal according to a report released by the parliamentary committee on Commissions, Statutory Authorities and State Enterprises (Cosase). 

The report indicated that an analysis of the bank's liquidity from January 1-24, 2017, revealed that the financial institution had recovered from liquidity distress from mid-January 2017 to the time it was disposed on January 25, 2017.  

"In fact, Bank of Uganda had stopped injecting money on January 9, 2017. Therefore the bank's liquidity position had stabilized,"  the report presented to parliament by outgoing Cosase chairperson Bugweri County MP Abdu Katuntu, reads.

Crane bank was closed by Bank of Uganda on October 20, 2016, after it failed to comply with a capital call on July 1, 2016. BoU governor Emmanuel Tumusiime-Mutebile said then that the bank's takeover was guided by the systemic nature of its under-capitalisation to avoid financial sector instability.

But Katuntu told parliament that his committee observed that BoU management did not provide a plan or assessment detailing efforts to return the bank into compliance with prudential standard despite funding with Shs 478.8 billion. 

Katuntu also noted the failure by BoU to involve the statutory manager Katimbo Mugwanya in the sale of the bank.

"There was even no opportunity for the statutory manager to formally handover the bank and indeed, Katimbo Mugwanya only learnt of the sale of the bank when he received a picture of loan files being ferried on his phone by WhatsApp when he was on his farm. He was told of the sale by his staff at CBL," Katuntu reported before playing an audio of Mugwanya presenting evidence to the committee concerning the matter.

The committee recommended that in the process of taking a decision to liquidate a financial institution, detailed plans for the revival should be exhausted before taking the most extreme action of liquidating. 

Cosase further recommends that the statutory manager's assessment as revealed in his report prior to liquidation, should be key in forming the basis for the decisions of the central bank in relation to liquidation. 

Earlier this month, former Crane bank owner, Sudhir Ruparelia told Cosase that the agreement for the sale of Crane bank to dfcu bank was shoddy and fraudulent.  

According to Sudhir, the Purchase of Assets and Liabilities (P&A) agreement signed between BoU and dfcu bank did not have details of all assets and liabilities that were being taken over. He said that the documents that were signed were shoddy and engineered for a fraudulent transaction.

Alex Rezida, a lawyer and former director in Crane bank said that the illegality of the sale is confirmed by the auditor general's report which stated that the central bank would have been concerned with the revival of the institution instead of breaking it.

The auditor general had earlier queried the failure by the central bank to prepare a plan to revive Crane bank and the consideration of Shs 200 billion from the bad books as the selling price for Crane bank to dfcu.

Debate on the Cosase report starts on Tuesday.

Comments

0 #1 kabayekka 2019-02-23 13:15
Where then are the report summaries for the other Uganda African banks that were abruptly closed and their staff interviewed by this Parliamentary committee?

And one wants to ask, Why did this committee not call on the staff of the Ganda Teefe Trust Bank to come on for this very important interview?
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0 #2 rubangakene 2019-02-23 20:50
Besides the "illegality of the sale" of this bank, what about we look back at the legality of acquiring or setting-up of the bank in the first place; have we carried out due analysis of this saga from day one?

Anyhow, what now; are criminal charges going to be instituted, are heads going to roll, who is going to 'bite the bullet' so to speak. Or is it going to be water under the proverbial bridge? Let Ugandans know the truth now!
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0 #3 kabayekka 2019-02-24 15:13
To ask for the presentation of Teefe Trust Bank to this committee comes out of the sense of economic despair that is happening in the State of Buganda.

Especially where land ownership is concerned. Did this isolated commercial African bank have no owners who must have been answerable to the government Auditor General?

The Ganda citizenry has seen some of its leadership acquiring revenue collection powers that need not to be verified by the government Auditor General and the Parliament of Uganda!

And yet the people of Buganda continue to pay lots of their money in Central Government Consumption and such income to this government is badly spent.
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