Kampala — Uganda’s central bank said on Thursday it had taken over management of the Crane Bank, the country’s largest locally owned commercial bank, saying its lack of capital posed a risk to the financial system.
Bank of Uganda governor Emmanuel Tumusiime-Mutebile said in a statement the bank would remain open, continue to operate normally and that the central bank would protect deposits.
Crane Bank, which says on its website it is Uganda’s fourth-largest bank in terms of assets and fifth in terms of deposits, is controlled by private Ugandan conglomerate, Ruparelia Group.
Crane Bank’s weakness is a sign that the Ugandan economy is not going well which affects business performance and, in turn, the banks
— Fred Muhumuza, former Ugandan Ministry of Finance official
According to Forbes magazine in 2015, the head of the family owned business, Sudhir Ruparelia, was the 27th richest man in Africa with a personal net worth of $800m. Ruparelia is reportedly close to veteran Ugandan President Yoweri Museveni.
Local media reported that Ruparelia made a private donation of $1m for the construction of a new headquarters for the ruling party ahead of February elections, which handed the 72-year-old leader his fifth term in office since he seized power in 1986.
Crane Bank has been struggling for some time with an increase in nonperforming loans and provisions for bad debts as companies fell back on loan repayments.
In a sign of the trouble to come, the Bank of Uganda released a statement last week to deny it was the source of messages circulating on the Whatsapp chat application urging clients to withdraw their money from Crane Bank.
"Crane Bank’s weakness is a sign that the Ugandan economy is not going well which affects business performance and, in turn, the banks," said Fred Muhumuza, a consultant and former economist at the Ugandan Ministry of Finance.
He said the Bank of Uganda had previously taken over management of the National Bank of Commerce and Global Trust Bank, whose licenses were both later revoked.
The National Bank of Commerce’s assets and deposits were taken over by Crane Bank in 2012 and Global Trust Bank by another financial services company in 2014.
"A central bank taking over a weak commercial bank isn’t an unusual event in east Africa. However, with smaller financial institutions the central bank will usually work with another, stronger bank to transition a transfer of ownership," said Muhumuza.
"Due to the size of the institution I expect the Bank of Uganda to keep control of Crane Bank for sometime rather than look for a quick sale, but they will be looking for a buyer." Crane Bank has a network of 46 branches.
AFP
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.