You are on your own when it comes to borrowing money from banks that extend loan facilities from their mother countries.
The Bank of Uganda bowed to the Bankers lobby group, and has said it does not have the powers to regulate extension of loans/credit or the financing of commercial transactions that are funded using money obtained from foreign banks that do not take deposits from the public in Uganda.
The Central Bank’s assertion is contrary to last week’s Commercial Court ruling in which Justice Henry Peter Adonyo declared that Diamond Trust Bank (DTB) Kenya illegally conducted business in Uganda because it had no license to do so.
Businessman Hamis Kiggundu alias Ham through his two companies Ham Enterprise Limited and Kiggs International (U) Limited had sued DTB-Uganda, and DTB-Kenya, in March this year, accusing them of fraudulently siphoning more than Shs 120 billion from his accounts without his knowledge and consent.
“The act of DTB-Kenya in conducting financial business is licenced in Kenya and it therefore illegally offered the facilities in Uganda. Consequently, this application is allowed with costs,” Commercial court head Justice Adonyo said in the judgement last Wednesday.
DTB Bank was ordered to refund all the money it collected from Ham’s accounts to pay for the loans on top of returning to him all the titles which he had surrendered to the financial institution in form of collateral security.
Now responding to the judgment, BoU Governor Prof Emmanuel Mutebile said on Tuesday that they had no powers to regulate extension of loans/credit or the financing of commercial transactions that are funded by using money obtained from foreign banks that do not take deposits from the public in Uganda.
“Foreign banks lending deposits held in jurisdictions other than Uganda are regulated and supervised by their home authorities. It is not mandatory for a foreign bank to establish a representative office in Uganda in order to conduct lending or non-deposit-taking activity,” Prof Mutebile noted.
He added that Bank of Uganda’s regulatory and supervisory powers only apply to financial institution business conducted by BoU licensed entities in or outside Uganda or activity which should be licensed as such in Uganda.
“These powers do not extend to activities of foreign banks outside Uganda licensed by foreign regulators.”
Going by Mutebile’s statement, there is no law stopping DTB Kenya from lending money to any entity in Uganda, be it Ham Enterprises as it was done since they are regulated and supervised by their home central bank.
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