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Auditor-general releases damning report on illegalities at the Bank of Uganda.
Uganda’s Auditor-general John Muwanga has released a report detailing irregularities and illegalities allegedly committed by the central bank in the closure and sale of non-performing commercial banks.
Over the past 25 years, the Bank of Uganda has closed seven commercial banks, some of whose proprietors and shareholders have accused it of irregularities.
At a recent public hearing, former Co-operative Bank customers and shareholders asked Minister of Finance Matia Kasaija to pay back their equity and deposits, which they claimed the government “stole.” The National Bank of Commerce and Crane Bank owners have gone to court to recover their assets.
In his 80 page report, the Auditor General says that given its conduct during the liquidation process, Uganda’s central bank lacks the discipline or willingness to perform basic business practices like keeping ledgers and records of their transactions during the liquidation of the closed commercial banks.
The only ledgers and records of the transactions that BOU could produce during the audit were those kept by institutions that the central bank would hired to handle the liquidation.
The report states that officials at BOU committed illegalities during liquidation of the banks. It adds that the most likely motivation was for their personal gain and not for the good of the financial sector.
BOU director of communications Charity Mugumya said, “The report was leaked before it was ready.” She added that they were discussing the report with the Auditor-general and would issue an official response after that process.
Mr Muwanga submitted the report to Speaker of parliament Rebecca Kadaga on August 17. It covers the process followed by BOU to liquidate the commercial banks, and details a trail of corruption allegations featuring officials unable to provide proof of the process they claimed to have followed.
One such example, according the report, is that the central bank claimed to have sold Ush570.4 billion ($148.8 million) worth of Crane Bank’s bad loans to DFCU Bank. The report says that BOU officials sold a good loan book worth Ush588.6 billion ($153.6 mil- lion) to DFCU Bank at a cost of Ush200 billion ($52.2 million).
The report further says that when BOU officials were asked about this anomaly they said that DFCU had been sold the bad loan book as well. The auditor general says that DFCU Bank decided what it wanted to pay for Crane Bank’s assets, and that is the amount that the central bank accepted.
Evidence of fraud
“There is evidence of fraud and collusion by BOU officials, transaction advisors and buyer,” says the report.
DFCU Bank had earlier benefited from the sale of Global Trust Bank (GTB). The Auditor-general’s report shows that DFCU bought well secured loans belonging to GTB at a discount, which is illegal under the Financial Institutions Act.
The report also shows that BOU sold the assets of the National Bank of Commerce to Crane Bank at a discount.
Severino Twinobusingye, a lawyer for the proprietors of NBC, says the central bank ignored a court injunction blocking the sale, alleging that officials had vested interests.
International Credit Bank (ICB), Greenland Bank, Cooperative Bank, Global Trust Bank and National Bank of Commerce, with assets worth Ush164 billion ($42.8 million) were sold at a discount of 80 per cent, the report shows.
In the cases of ICB, Greenland and Co-operative Bank, whose assets were sold at a 93 per cent discount, the BOU rejected an offer of $10 million ($37.9 million) in May 2007, but accepted half that price seven months later. The central bank accepted 26 per cent of the value of loans that were well documented, with legal and equitable mortgages.
Uganda’s Auditor General submitted a report alleging fraud by officials of the Bank of Uganda.