Auditor General tasks BoU to explain why closed banks are sold cheaply

By our reporter

The Auditor General (AG) John Muwanga has tasked Bank of Uganda management (BoU) to explain why they always sell the closed banks at cheaper prices.

According to the Auditor General, BoU’s tendency to sell closed banks cheaply has been causing losses to shareholders.

Banks such as Teefe, International Bank, Credit Bank, Greenland Bank, Cooperative Bank, National Bank of Commerce, Global Trust Bank and Crane Bank were sold without regulation or policies in place to guide the identification of purchasers.

For example, in December 2007, Mr. Muwanga says BoU signed an agreement with Nile River Acquisition Company to sell the debt portfolio of Greenland Bank, ICB and Cooperative Bank at $5.2m (shs8 billion).

The debt portfolio comprised secured, poorly secured and unsecured loans amounting to shs135 billion.
The AG discovered that loans worth Shs 135bn were sold to Nile River at a paltry Shs8bn “resulting in a variance of Shs126bn.”

And last year BoU sold Crane Bank with total assets amounting to shs1.3 trillion to Dfcu at only shs200 billion.

However, the sale agreement between Central Bank and Dfcu indicated that the shs200 billion was payment for liabilities.

The agreement also did not state the amount of money paid by Dfcu as a net purchase price; or the payment terms for monies, or the assets (outside branches) that Dfcu was taking over.

The agreement which excluded shareholders of Crane Bank contrary to the Financial Institutions Act, also did not itemize the list of assets acquired (save for leases).

Mr. Muwanga’s move comes at a backdrop after Speaker of Parliament Rebecca Alitwala Kadaga asked him to disregard the Attorney General’s contrary advice of sub-judice rule and proceed to audit BoU.

The AG is required to look into the status of various banks at closure, cost of liquidation, assets and liabilities, non-performing assets, non-recoverable assets of Crane Bank as well as other closed banks and the entire disposal chain.