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Auditor General faults Mutebile for Crane Bank sale

A special report of the Auditor General says recurrent incompetence at Bank of Uganda that dates back to 1993 has led to closure of seven commercial banks

ECONOMY | A confidential special audit report by the Auditor General (AG) has poked holes in the management of business at the central bank and faulted Governor Emmanuel Mutebile’s team for the glaring economic ‘fatal’ mistakes in the sale of Crane Bank.

The report says seven commercial banks has been closed following incompetent decisions by central bank management since 1993.

In his new report to Parliament, the Auditor General, John Muwanga, queried BoU officials on the flaws in the closure of Teefe Bank (1993), International Credit Bank Ltd (1998), Greenland Bank (1999), The Co-operative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) and the sale of Crane Bank Ltd to dfcu in 2016.

“I observed that there were no guidelines/regulations or policies in place to guide the identification of the purchases of the defunct banks. There were also no guidelines to determine the procedures to be adopted by central bank in the sale/ transfer of assets and liabilities of the defunct banks to the identified purchaser,” the AG report reads in part.

The AG has also poked holes in the Purchase of Assets and Assumption of Liabilities (P&A) deal BoU officials signed with dfuc on January 25, 2017, for the purchase of Crane Bank Limited, formerly owned by tycoon Sudhir Ruparelia and others.

“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 BoU selected the best evaluated bidder and how the terms in P&A were determined,” the report adds.

On the valuation of assets and liabilities of Crane Bank before dfcu took over the bank in a Shs200 billion deal, the AG complained to Parliament: “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 Crane Bank.”

In a meeting with the BoU’s outgoing executive director for supervision Justine Baygenda held on June 13, 2018, at BoU offices, the directors admitted that the BoU did not carry out a valuation of the CBL assets and liabilities but relied on inventory report and the due diligence undertaken by dfcu to arrive at P&A agreement.

The AG, however, says BoU officials gave him a soft copy of details of assets and liabilities although the information lacked details of loans and advances transferred to dfcu and evidence of valuation of assets before sale hence it was insufficient to respond to his observation.

The 94-page special audit report was yesterday presented to Parliament and the Speaker forwarded it to the Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) for scrutiny.

Cosase is expected to summon central bank officials and other stakeholders to answer queries raised by the AG before a committee report is sent to House for debate.

Liquidity mess

Mutebile and his team have also been questioned on the expenditure of more than Shs478 billion they say was for liquidity support and other interventions in Crane Bank after they took over the management on October 20, 2016.

The AG inquired into the source of the money BoU injected into Crane Bank and wondered how Mutebile’s team arrived at Shs478.8 billion.

For compiling the inventory report, forensic review and investigations, IT support and hiring of external lawyers, BoU officials spent Shs12.2 billion.

This money is part of the Shs478.8 billion they say was injected in Crane Bank. The AG, according to sources, has requested Cosase to investigate the expenditure of these funds.

How deal blew up

The audit into the defunct banks was prompted by petitions from Crane Bank shareholders and central bank employees. They petitioned Cosase chaired by Abdul Katuntu and demanded investigation into undisclosed the BoU-dfcu deal and other issues in the closure of other banks.

Two whistle-blowers also petitioned Parliament and the IGG on the same matter, calling for an independent audit into the agreement BoU signed with dfcu Bank.

In one of the petitions, the former Crane Bank shareholders allege that they were excluded in the negotiations of the bank’s sale contrary to provisions of the Financial Institutions Act. They also argued that the agreement did not state the value of liabilities or assets taken over by dfcu.

The central bank and Sudhir are battling it out in court over the controversial sale of Crane Bank to dfcu and recovery of about Shs397 billion BoU says went missing from Crane Bank before liquidation.

Although MPs led by Budadiri West MP Nandala Mafabi wanted to table a motion to investigate the Crane Bank saga, Deputy Speaker Jacob Oulanyah ruled that any such inquiry would be stayed until all related cases have been disposed of in court.

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