The Bank of Uganda (BoU), the regulator of Uganda’s banking sector didn’t carryout evaluation of assets and liabilities of Crane Bank Limited (CBL) before selling the defunct bank to dfcu, the leaked Auditor General’s report has revealed.
“On 10th April 2018, I requested for the P&A agreement indicating details of the assets and liabilities transferred to the purchaser (DFCU) to enable me assess whether the CBL assets and liabilities were transferred after taking into account the requisite valuation. I noted that BOU did not carry out a valuation of the assets and liabilities of CBL,” the report says in part.
It adds: “In absence of the valuation, I could not establish how the terms for the transfer of assets and liabilities in the P&A were determined.”
It should be noted that Section 95 (3) (a) and (b) of the Financial Institutions Act 2004 provides that in determining the amount of assets that is likely to be realized from the financial institution’s assets, the receiver (read BOU in this case) shall evaluate the alternatives on a present value basis, using a realistic discount rate or document the evaluation and the assumptions on which the evaluation is based, including any assumptions with regard to interest rates, asset recovery rates, inflation, asset holding and other costs.
The Auditor General, John Muwanga says the Executive Director Supervision at BoU explained that “BOU did not carry out evaluation of the assets and liabilities of CBL but relied on the Inventory report and due diligence undertaken by DFCU to arrive at the P&A.”
“I also noted that the P&A did not have complete details of assets and liabilities transferred to DFCU with the corresponding values; I was therefore unable to establish the status of assets and liabilities transferred to DFCU,” the report says.
It adds: “Although, I was provided with a soft copy of details of values of assets and liabilities transferred to DFCU and those retained by BOU, the information provided by BOU lacked details of loans and advances transferred to DFCU and evidence of a valuation of the assets before sale hence it was insufficient to respond to my observation.”
