The banking sector in Uganda is poised to slumber into unprecedented liquidity if Bank of Uganda continues to witch-hunt commercial banks, a Crane Bank official said adding that the entire banking fraternity in the country is not doing well. He warned that the public should pay attention to their bankers because of them are worse off.
Bank of Uganda governor Emmanuel Tumusiime Mutebile on Thursday in a public notice announced that the central bank was taking over Crane bank because they are ‘significantly undercapitalised’ and ‘poses a systematic risk to the stability of the financial system’.
But the official at the affected bank emphasized that while they are have liquidity issues, the bank has assets, expertise to come of this distress. He revealed that Bank of Uganda has turned down all potential investors that the bank sought to inject equity in the bank which served Ugandans since 1995. The official doubted the motive of Bank of Uganda.
“This is not good for Crane Bank and the entire banking sector and the public should worry. We have been engaging Bank of Uganda and we have a plan to get where we where before. We are looking for an investor to recapitalize the bank but look where we are,” the official said.
“Bank of Uganda is creating panic in the banking industry and this will lead to liquidity because people will withdraw their money, they will stop depositing with banks and bank will have no money to lend or invest,” he added warningly.
Crane Bank founder Sudhir Ruparelia confirmed that they were in advanced stages of acquiring a potential investor. This revelation came in the wake of rumors that Sudhir was selling the bank. Despite confirming the negotiations, he said he was barred to reveal the name of investor by the non disclosure agreement he entered with said investor.
Bank of Uganda despite saying they had ‘not received any request from Crane Bank to approve a change in shareholding’, Christine Alupo, the Director of Communication at Bank of Uganda in a statement said shareholders of commercial banks have the option of selling shares to new investors as they deem appropriate.
‘However, any new investor in a commercial bank must satisfy the regulator that they are fit and proper. The BoU does not comment on any negotiations to sell shares in a bank while these negotiations are ongoing.” She explained.
“In line with the Financial Institutions Act 2004 (FIA 2004) as amended in 2016, if a commercial bank wishes to dispose of equity worth 5 percent or more of its shares, the sale must be approved by the Bank of Uganda.”
Experts like Hellen Nakuya who manages an investment firm in Kampala also explained that people will in the long run stop going to keep their money in the banks if Bank of Uganda continues to shut down banks. “What Bank of Uganda must do is to ensure that Crane Bank doesn’t close because people will lose their savings then they will fear dealing with banks,” Nakuya said.
“Bank of Uganda should rectify anything that is wrong at Crane Bank if there is any and give it back to the shareholders and continue to guide them. We don’t want to see a scenario that befell Greenland when people lost their money.” She added.