How Bagyenda connived with dfcu to keep Crane Bank bad loan book off the record

By Ivan Mubiru

A document exposing how former dfcu Bank connived with former Bank of Uganda Director in charge of Supervisionn Justine Bagyenda to keep Crane Bank bad loan book off the record, has surfaced.

In a letter titled, Compliance Accommodations dated January 25, 2017, Bagyenda told dfcu Managing Director Juma Kisaame that acquired Crane Bank non-performing loans and advances would be managed and reported separately from dfcu’s pre transaction balance sheet for a period of at least 12 months.

“The assets acquired and liabilities assumed will be reported separately from dfcu’s balance sheet for the 31th January 2017 end of month report to BoU. The first consolidated balance sheet will be that of 31st March 2017. The non- performing loans and advances acquired by dfcu will be managed and reported on separately from dfcu’s pre-transaction balance sheet for a period of at least twelve months,” Bagyenda told Kisaame.

This means that as dfcu took over Crane Bank, some assets and liabilities of the latter where not evaluated such as the non-performing loans.

This clearly explains why a bank worth Shs1.2 trillion was sold out for only Shs200 billion by Bank of Uganda.

Bagyenda also explained that any acquired performing loans and advances reflected on dfcu’s balance sheet at integration will be deemed and treated as new to dfcu and hence eligible for restructuring for purposes of the financial Institutions (credit classification and provisioning requirement.

She also directed that all fully provisioned loans and advances acquired by dfcu will be ring-fenced and managed separately and would not be part of dfcu’s loan portfolio for reporting purposes until rehabilitated in conformity with the Financial Institution Act.

She further emphasized, “dfcu will rationalise the acquired CBL branch network in accordance with its strategic plans and operational requirements which may result in the closure of some branches. Dfcu will carry some non-core assets acquired pursuant to the agreement including land and buildings on its balance sheet for at least 36 months,”

The directive,  according to Online media, was passed in connivance between Deputy Governor Louis Kasekende, Kisaame, dfcu Bank limited board chairman Jimmy Mugerwa and former external Bank of Uganda lawyers David Mpanga and Timothy Masembe.

The development comes hot on the heels of the recent Auditor General’s report that punches holes in Central Bank’s sale of Crane Bank.

AG John Muwanga said the Purchase of Assets and Assumption of Liabilities (P&A) deal Bank of Uganda officials signed with dfcu on January 25, 2017 for the purchase of Crane Bank Limited, formerly owned by tycoon Sudhir Ruparelia and others, didn’t follow the right procedures.

“I was not provided with the negotiation minutes leading to the P&A agreement. In the absence of the minutes, I could not determine how Bank of Uganda selected the best evaluated bidder and how the terms in P& A were determined,” the report adds.

When it came to the valuation of assets and liabilities of Crane Bank before the Dfcu takeover of the bank at Shs200 billion, the AG said, “On April 10, 2018, I requested for P&A agreement, including details of the assets and liabilities transferred after taking into account the requisite valuation. I noted that BoU did not carry out a valuation of the assets and liabilities of CBL. In the absence of the valuation, I could not establish how the terms for the transfer of assets and liabilities in the P&A were determined.”

On the other hand, Bank of Uganda officials led by Governor Emmanuel Mutebile on Thursday appeared before Parliamentary Commission on Statutory Authorities and State Enterprises (Cosase) to answer case regarding the controversial closure and sale of seven commercial banks including Crane Bank.

However, the inquiry was adjourned after the officials failing to provide all the necessary documents required by the legislators on the committee.

Abdul Katuntu, the committee chair ordered the Central Bank officials to return on Friday morning following Mutebile’s request to have  two working days to have all the required documents availed to the committee.