Bank of Uganda takes over troubled Crane Bank, suspends management

Bank of Uganda officials at a press conference in which the governor, Emmanuel Tumusiime-Mutebile, said the central bank is taking over the management of Crane Bank. Photo: Uganda Business News
Bank of Uganda officials at a press conference in which the governor, Emmanuel Tumusiime-Mutebile, said the central bank is taking over the management of Crane Bank. Photo: Uganda Business News

Bank of Uganda has taken over the management of Crane Bank Limited, Emmanuel Tumusiime-Mutebile, governor of the central bank, told journalists at a hastily convened press conference on Thursday.

“Bank of Uganda has effective today, 20th October 2016, taken over the management of Crane Bank Limited,” Mutebile said.

“This action has been taken upon a determination by Bank of Uganda that Crane Bank Limited is a significantly undercapitalised institution as defined by law, poses a systemic risk to the stability of the financial system and that the continuation of Crane Bank’s activities in its current form is detrimental to the interests of depositors.”

The governor said the central bank has appointed a statutory manager of the affairs of Crane Bank Limited, and suspended the bank’s board of directors.

The central bank also relieved Crane Bank’s managing director of his duties. “You are accordingly suspended from your position as acting managing director and you are required to make a formal handover of your responsibilities to the Bank of Uganda Statutory Manager, Mr Edward Katimbo Mugwanya,” a letter from the governor said.

The letter however says that the suspended MD will serve as principal support of the statutory manager.

The bank will remain open and operations will continue normally but under the management and control of Bank of Uganda, Mutebile said.

“Bank of Uganda further reassures the public that it will continue to protect depositor’s interests and maintain the stability of the financial sector.”

There have been recent concerns about the bank’s financial health, growing from reports in September that 70% of its shares had been sold to a South African bank. The bank said the claims were false, but that it was seeking to merge with a “strategic equity investor.”

Read More: Crane Bank denies rumours of sale, says in merger talks with “strategic equity investor”

Suspicions about its precarious financial position were proven today by the Bank of Uganda, which called it a “significantly undercapitalised institution.” Its troubles apparently arose from large non-performing loans on its books, hence the search for an investor to offer more capital. It was the worst performing bank in 2015, registering total losses of Shs3.31 billion – the first time it was registering a loss in 10 years. By contrast, it made a Shs50.64 billion profit in 2014.

The East African newspaper reported recently that ex-Barclays chief executive, Bob Diamond, has agreed in principle with the bank’s shareholders to acquire a strategic stake. Diamond is the founder of Atlas Mara, a financial services group that aims to build a banking empire in sub-Saharan Africa. Crane Bank has not said anything about those negotiations.

Last week, Bank of Uganda was also forced to deny a WhatsApp message advising Crane Bank’s depositors to withdraw their money. Many however pointed out that the statement left out one particularly important reassurance: that Crane Bank is in a sound financial condition.

Read More: Social media message on Crane Bank inaccurate, says Bank of Uganda

The last time Bank of Uganda took over the management of a commercial bank was in October 2015 when Imperial Bank was placed under curatorship. This was after Kenya’s central bank suspended operations of its majority shareholder, Imperial Bank Ltd. Kenya, because of “unsafe or unsound business conditions to transact business.”

In March 2016, BoU announced that it had sold Imperial Bank Kenya’s stake to Exim Bank (Tanzania) Ltd., which then took over the bank. Bank of Uganda ended its statutory management in the lender, which then changed its name to Exim Bank (Uganda) Ltd.

And, an interesting piece of history given today’s development, Crane Bank took over National Bank of Commerce after its licence was revoked by Bank of Uganda in September 2012. The central bank initially placed NBC under statutory management; a day later, it said it had cancelled the bank’s licence and told depositors to operate their accounts in Crane Bank.