Crane Bank was not grossly insolvent and could have been possibly restored to operational and full compliance with capital adequacy by the Central Bank, the Auditor General has discovered.
Instead, Bank of Uganda top administration opted to ‘donate Crane Bank’ to DFCU bank at a cost of shs 200 billion non- cash.
Dated August 27th 2018, and titled: Special Audit Report of Bank of Uganda on closed commercial banks addressed to the Speaker of Parliament, the findings expose several gaps in the way the Central Bank has for long mismanaged sale of 7 private banks 1993 and 2017.
For the first time, this new report scrutinises the hotly contested sale of Crane Bank which belonged to wealthy businessman Sudhir Ruparelia on grounds that it had become insolvent having caused a loss of shs 300 billion.
However, Mr. Ruparelia and a horde of Crane Bank shareholders rushed to Court to seek legal redress, a battle that has since left Bank of Uganda exposed with its seniors officials cited as having played a key role in the collapse of this biggest private bank in Uganda.
This commercial litigation has sucked in several organs of government including Parliament which would later direct the Auditor General (AG) to assess the Central Bank’s Conduct through a comprehensive audit.
Findings
In this particular case the Attorney General, in his observations begins by quoting section 89(5) of the Financial Intelligence Act (FIA) which states that “the central bank shall exercise statutory management over a financial institution for the minimum time necessary to bring the financial institution nto compliance with prudential standards.
In executing the about function still section 90(4)(c) of the F1A 2001 requires the statutory manager to evaluate the capital structure and management of the Institution and recommend 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.
When Crane Bank was put on receivership, Bank of Uganda on October 20, 2016, appointed a statutory manager who would collectively act and make decisions on behalf Crane Bank.
His/her roles were; to trace and preserve all the properties and assets of Crane Bank
Recover debts and other sums of money due and owing to the bank
Evaluate the capital structure and management of the bank and recommend to Bank of Uganda any restructuring or re-organisation which he/she recommends
Enter contract in the ordinary course of the business of the bank including raising funds by borrowing
Issue a new balance sheet and profit loss accounts and also assume any other duties which could be assigned to him or her by Bank of Uganda.
However, in his investigations when the Auditor General tasked Bank of Uganda to produce the appointment letter and terms of reference of the Statutory Manager to establish emoluments due to him/her, and the reporting lines and deliverables.
The Auditor General discovered that the letter providing term of reference didn’t stipulate the Statutory Manager’s key deliverables.
“I couldn’t establish on which deliverables the Statutory Manager’s performance was measured,” the Auditor General indicated.
It is against this backdrop that Mr John Muwanga while carrying out his audit in April 2018 requested for reports of the Statutory Manager and details of the funds injected into Crane Bank prior to take over indicating; purpose of injection, amount to be injected, procedures and approval of the intended injection, recovery plan and how the injected funds were to be managed to establish the efforts taken by the statutory manager to revive Crane Bank.
“Bank of Uganda management did not provide a plan or assessment detailing efforts to return the bank Into compliance with prudential standards despite funding of UGX.478.8bn being injected into CBL In absence of the plan or assessment to revive COL, I could not provide assurance as to whether Sections 89(5) and 90(4)(c) of the FIA 2001 vas complied with,” the report further reads in parts.
Instead, the Central Bank defended its negligence, ill motive and incompetence explaining that having taken Crane Bank into statutory management it discovered the bank was grossly insolvent.
Concerned officials from Bank of Uganda were not reached for a comment, the new institution’s new publicist Charity Mugumya didn’t answer our repeated calls or attempt to return them by the time of filing this report.
TrumpetNews will serialize the report in the coming days