Justine Bagyenda, the Executive Director Supervision-Commercial Banking at Bank of Uganda (BoU) has spoken out on the state of Uganda’s banking sector following the collapse of Crane Bank that has been in the news since late last year.
“The banking sector is strong and resilient,” Bagyenda said.
She made the remarks on Friday at a press conference held at BoU head offices in Kampala, where the Central Bank announced its monetary policy statement for August 2017. The Central Bank Rate (CBR), a benchmark lending rate for commercial banks was maintained at 10%.
However, Bagyenda admitted that there are ‘gaps’ in Uganda’s banking sector that the Central Bank is trying to ‘close’. BoU however declined to discuss matters related to Crane Bank since the case is before court.
On June 30, 2017, BoU filed a civil suit at the Commercial Court against Sudhir Ruparelia and his investments firm Meera Investments Ltd to “recoup funds that were fraudulently extracted from, as well as losses that were caused to Crane Bank.”
In a statement issued on July13, 2017, BoU said as a Receiver of Crane Bank Ltd (Crane Bank) and regulator of the banking sector it seeks to recover about Shs400bn, Freehold titles of Crane Bank’s branches, general damages, interest and costs.
Analysts say the Crane Bank saga is bad for Uganda’s banking sector and the economy.
In a recent interview, Dr. Fred Muhumuza, an economics expert and lecturer at Makerere University said that while some Crane bank clients were moved to dfcu and others found banks of their choice, the Crane bank saga has increased uncertainty in the market.
“It did not (Crane Bank collapse) affect the bulk of depositors, but certainly the borrowers are still suffering. Some were given little time to complete loans on new rates; others of course miss the personal gains they used to bet from personal knowledge of staff and owners,” Muhumuza said.
He added: “It has also increased uncertainty in the sector as people now doubt even when BoU says all is ok.”
On October 20, 2016, the Bank of Uganda (BoU) announced that it had taken over the management of Crane Bank Ltd after the bank became “a significantly undercapitalized institution.”
Consequently, on February 27, 2017, BoU announced the acquisition of the now defunct Crane Bank by dfcu-at an undisclosed fee. It was revealed that dfcu beat off competition from other 12 financial institutions to emerge winner.