Uganda’s Auditor-General John Muwanga has released a report
detailing irregularities and illegalities allegedly committed by the
central bank in the closure and sale of non-performing commercial banks.
Over
the past 25 years, the Bank of Uganda has closed seven commercial
banks, some of whose proprietors and shareholders have accused it of
irregularities.
At a recent public hearing, former
Co-operative Bank customers and shareholders asked Minister of Finance
Matia Kasaija to pay back their equity and deposits, which they claimed
the government “stole.” The National Bank of Commerce and Crane Bank
owners have gone to court to recover their assets.
In
his 80 page report, the Auditor-General says that given its conduct
during the liquidation process, Uganda’s central bank lacks the
discipline or willingness to perform basic business practices like
keeping ledgers and records of their transactions during the liquidation
of the closed commercial banks.
The only ledgers and
records of the transactions that BoU could produce during the audit were
those kept by institutions that the central bank would hired to handle
the liquidation.
The report states that officials at
BoU committed illegalities during liquidation of the banks. It adds that
the most likely motivation was for their personal gain and not for the
good of the financial sector.
'Leaked'
BoU director of
communications Charity Mugumya said, “The report was leaked before it
was ready.” She added that they were discussing the report with the
Auditor-General and would issue an official response after that process.
Mr
Muwanga submitted the report to Speaker of parliament Rebecca Kadaga on
August 17. It covers the process followed by BoU to liquidate the
commercial banks, and details a trail of corruption allegations
featuring officials unable to provide proof of the process they claimed
to have followed.
One such example, according the
report, is that the central bank claimed to have sold Ush570.4 billion
($148.8 million) worth of Crane Bank’s bad loans to DFCU Bank.
The
report says that BoU officials sold a good loan book worth Ush588.6
billion ($153.6 million) to DFCU Bank at a cost of Ush200 billion ($52.2
million).
The report further says that when BoU
officials were asked about this anomaly they said that DFCU had been
sold the bad loan book as well. The auditor general says that DFCU Bank
decided what it wanted to pay for Crane Bank’s assets, and that is the
amount that the central bank accepted.
Evidence of fraud
“There is evidence of fraud and collusion by BoU officials, transaction advisors and buyer,” says the report.
DFCU
Bank had earlier benefited from the sale of Global Trust Bank (GTB).
The Auditor-General’s report shows that DFCU bought well secured loans
belonging to GTB at a discount, which is illegal under the Financial
Institutions Act.
The report also shows that BoU sold the assets of the National Bank of Commerce to Crane Bank at a discount.
Severino
Twinobusingye, a lawyer for the proprietors of NBC, says the central
bank ignored a court injunction blocking the sale, alleging that
officials had vested interests.
International Credit
Bank (ICB), Greenland Bank, Cooperative Bank, Global Trust Bank and
National Bank of Commerce, with assets worth Ush164 billion ($42.8
million) were sold at a discount of 80 per cent, the report shows.
In
the cases of ICB, Greenland and Co-operative Bank, whose assets were
sold at a 93 per cent discount, the BoU rejected an offer of $10 million
($37.9 million) in May 2007, but accepted half that price seven months
later. The central bank accepted 26 per cent of the value of loans that
were well documented, with legal and equitable mortgages.
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