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- Feb 26, 2015
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The Bank of Uganda has taken management control of Crane Bank because it lacked sufficient capital and posed a systemic risk to the financial system, the central bank said last Thursday.
This is the second bank, after Imperial Bank Uganda, which has since been sold, to be put under central bank in one year.
Bank of Uganda governor Emmanuel Tumusiime-Mutebile, who called Crane Bank the country’s third largest, told a news conference the bank would remain open and operate normally.
“Bank of Uganda further reassures the public that it will continue to protect depositors’ interests and maintain the stability of the financial sector,” he said.
In a sign the bank might be facing challenges, the BoU issued a statement last week saying messages circulating on WhatsApp that told depositors to withdraw cash from Crane Bank had not been sent by the central bank.
Crane Bank reported a consolidated pre-tax loss of 7.353 billion shillings ($2.14 million) in 2015 compared to a 57.066 billion shillings profit in 2014, after reporting a rise in expenses and impairment losses on loans and advances.
Massive withdrawals disguised as payments to suppliers by corporate customers over the past two months prompted the placement of Crane Bank under management by the Bank of Uganda.
Industry sources told The EastAfrican how traders and government agencies were tipped off by employees on a widening hole in the bank’s balance sheet following the coming into force last year of stricter regulations on provisions for non-performing debts.
This prompted the customers, including a large institutional investor, to give instructions for settlement of invoices and statutory obligations against their balances. The transactions looked routine but caught the management’s attention too late when it was found no new money was being deposited into the accounts.
Sources said that the bank, which was already suffering a $50 million capital hit from the bad debt treatment, may have bled as much as Ush300 billion ($87 million) over the period.
The loss of confidence by key customers is what attracted social media speculation on the bank’s future over the past fortnight forcing BoU’s hand in a bid to avoid a further run that would have posed systemic risks for the sector.
“This action has been taken upon a determination that Crane Bank Limited is significantly undercapitalised as defined by law, poses a systemic risk to the stability of the financial system and that the continuation of Crane Bank’s activities in its current form is detrimental to the interests of its depositors,” Bank of Uganda governor Emmanuel Tumusiime-Mutebile said on Thursday.
The governor said he had suspended the bank’s board of directors and senior management team, appointing Edward Katimbo Mugwanya as the statutory manager.
This is the second bank, after Imperial Bank Uganda, which has since been sold, to be put under central bank in one year.
Bank of Uganda governor Emmanuel Tumusiime-Mutebile, who called Crane Bank the country’s third largest, told a news conference the bank would remain open and operate normally.
“Bank of Uganda further reassures the public that it will continue to protect depositors’ interests and maintain the stability of the financial sector,” he said.
In a sign the bank might be facing challenges, the BoU issued a statement last week saying messages circulating on WhatsApp that told depositors to withdraw cash from Crane Bank had not been sent by the central bank.
Crane Bank reported a consolidated pre-tax loss of 7.353 billion shillings ($2.14 million) in 2015 compared to a 57.066 billion shillings profit in 2014, after reporting a rise in expenses and impairment losses on loans and advances.
Massive withdrawals disguised as payments to suppliers by corporate customers over the past two months prompted the placement of Crane Bank under management by the Bank of Uganda.
Industry sources told The EastAfrican how traders and government agencies were tipped off by employees on a widening hole in the bank’s balance sheet following the coming into force last year of stricter regulations on provisions for non-performing debts.
This prompted the customers, including a large institutional investor, to give instructions for settlement of invoices and statutory obligations against their balances. The transactions looked routine but caught the management’s attention too late when it was found no new money was being deposited into the accounts.
Sources said that the bank, which was already suffering a $50 million capital hit from the bad debt treatment, may have bled as much as Ush300 billion ($87 million) over the period.
The loss of confidence by key customers is what attracted social media speculation on the bank’s future over the past fortnight forcing BoU’s hand in a bid to avoid a further run that would have posed systemic risks for the sector.
“This action has been taken upon a determination that Crane Bank Limited is significantly undercapitalised as defined by law, poses a systemic risk to the stability of the financial system and that the continuation of Crane Bank’s activities in its current form is detrimental to the interests of its depositors,” Bank of Uganda governor Emmanuel Tumusiime-Mutebile said on Thursday.
The governor said he had suspended the bank’s board of directors and senior management team, appointing Edward Katimbo Mugwanya as the statutory manager.