By Abraham Kizza
KAMPALA. Bank of Uganda (BoU) Governor, Emmanuel Tumusiime Mutebile has said that the Central Bank is recovering the Shs200b spent on Crane Bank before the takeover after registering huge financial losses.
Mr. Mutebile says the Shs200b of Shs478b has been recovered through the sale of assets and purchase of assumption transaction which transferred assets and liabilities of Crane Bank to DFCU Bank.
“In taking over and resolving Crane Bank in the manner in which it did, the BoU was able to achieve the objective of maintaining stability in the banking system,” Mr. Mutebile said in a statement on Monday.
He said the vast majority of the money (Shs466b) was liquidity support, adding that Crane Bank had been losing liquidity for months prior to its takeover by the Central Bank.
“Apart from the Shs466b of liquidity support to Crane Bank, the BoU also spent Shs12b in resolving Crane Bank. These were expenses that were necessary to ensure that the assets and liabilities of Crane Bank could be transferred to another bank, thereby allowing Crane Bank’s customers to continue having access to normal banking services,” he noted.
The Governor says that the central Bank had to intervene in Crane Bank because a large share of its loan portfolio was not being serviced by the borrowers and customers were losing confidence in the bank and withdrawing their deposits. He adds that between the end of June 2016 and the end of September 2016, Crane Bank’s deposits fell by Shs148b.
As its liquidity drained away, Mr. Mutebile says Crane Bank requested liquidity support from the BoU.
“In fact, Crane Bank would have collapsed. Because it was such a large bank, its collapse would have risked chaos in the financial system, possibly causing contagion to other Banks and bank runs by depositors. That would have caused a huge amount of economic damage. No responsible Central Bank could allow this to happen,” he added.
Mr. Mutebile says BoU is in the process of attempting to recover the rest of the money it provided Crane Bank from its(Crane Bank) shareholders, who were responsible for the bank’s huge losses.