By Mubiru Ivan

Top Bank of Uganda officials are today expected to face Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) as the probe into the bank’s irregular operations starts.

The operations in question include among others the closure and controversial sale of seven commercial banks such as Crane Bank.

The officials summoned are Governor Emmanuel Tumusiime-Mutebile, his deputy Louis Kasekende;  former BoU director-in-charge of banks supervision, Justine Bagyenda and the dfcu managing director, Mr  Juma Kisaame.

According to Daily Monitor, the committee will be guided by the forensic report by the Auditor General which indicated abnormalities in the sale of the banks.

In September this year, Auditor General John Muwanga, punched holes in BoU’s 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 (CBL) to dfcu (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,” Mr Muwanga noted.

The AG said the Purchase of Assets and Assumption of Liabilities (P&A) deal BoU officials signed with Dfcu on January 25, 2017 for the purchase of Crane Bank Limited, formerly owned by tycoon Sudhir Ruparelia and others, didn’t follow the right procedures.

“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 read.

When it came to the valuation of assets and liabilities of CBL before the dfcu takeover of the bank at Sh200 billion, the AG said, “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 CBL. In the absence of the valuation, I could not establish how the terms for the transfer of assets and liabilities in the P&A were determined.”

In a meeting with the BoU’s outgoing executive director of supervision, Bagyenda 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.
“I also noted that the P&A did not have complete details of assets and liabilities transferred to dfcu with their corresponding values; I was therefore, unable to establish the status of assets and liabilities transferred to dfcu.”

The AG, however, said 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.

Mr Mutebile and his team were also questioned on the expenditure of more than Shs478.8b which they say was for liquidity support and other interventions in CBL after they took over the management on October 20 2016.

The AG enquired into the source of the money BoU injected in CBL and wondered how Mr Mutebile’s team arrived at Shs478.8b.
For compiling the inventory report, forensic review and investigations, IT support and hiring of external lawyers, BoU officials spent Shs12.2b.

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

Although the AG wondered how the taxpayers’ money would be recovered, in the exit meeting with AG officials held on June 22, 2018, Mr Mutebile’s team explained that the money in question was sourced from within BoU budget and that it will be recovered from the CBL shareholders.

Other defunct banks

In the report, the AG says BoU sold assets of ICB, Greenland, Cooperative, GTB and NBC worth Shs164b at a discount of 80 per cent, yielding only Shs32b.

In the case of ICB, Greenland and Cooperative Bank, the total loan portfolio sold at Shs135b included secured loans of Shs34.5b which had valid legal, or equitable mortgage on the real property and were supported with legal documentation but were sold to Nile River Acquisition Company at a discount of 93 per cent.