The East African - - FRONT PAGE - - Ge­orge Ka­mau

Bank of Uganda needs more cap­i­tal after Crane Bank res­cue

THE GOV­ERN­MENT OF Uganda will have to in­ject ad­di­tional cap­i­tal into the Bank of Uganda after its core cap­i­tal fell be­low the statu­tory min­i­mum on the back of costs in­curred in at­tempts to save the col­lapsed Crane Bank. The BOU recorded a loss of Ush72.5 bil­lion ($19.8 mil­lion) in the year ended June.

The re­cap­i­tal­i­sa­tion will cost the gov­ern­ment at least Ush2.7 bil­lion ($737,380) after the bank’s core cap­i­tal fell to Ush17.3 bil­lion ($4.7 mil­lion) against a min­i­mum re­quire­ment of Ush20 bil­lion ($5.4 mil­lion).

The drop fol­lows the de­ci­sion by BOU to book the full amount it is sup­posed to re­cover from ma­jor Crane Bank share­holder, Sud­hir Ru­par­e­lia, to tak­ing Ush197 bil­lion ($53.9 mil­lion), as an im­pair­ment.

BOU in­jected Ush472.5 bil­lion ($129.4 mil­lion) into Crane Bank be­tween Oc­to­ber last year and June as in­ter­ven­tion costs, of which Ush397.8 bil­lion ($109 mil­lion) was out­stand­ing at the end of the fi­nan­cial year.

The cen­tral bank also sold some Crane Bank as­sets to DFCU for Ush200 bil­lion ($54 mil­lion), which will be paid over two and a half years.

Mr Ru­par­e­lia has put up a spir­ited le­gal and po­lit­i­cal bat­tle against de­mands the the reg­u­la­tor, ac­cus­ing the cen­tral bank of hav­ing failed in its su­per­vi­sory role, which re­sulted in the col­lapse of Crane Bank.

“The BOU will, re­quire re­cap­i­tal­i­sa­tion in line with Sec­tion 14(4) of the Bank of Uganda Act,” said BOU gover­nor Prof Em­manuel Tu­musi­ime.

As per the Act, the gov­ern­ment is re­quired to fur­nish the bank with se­cu­ri­ties to cover for cap­i­tal short­fall or the bank can, in con­sul­ta­tion with the fi­nance min­is­ter, trans­fer cash from the gen­eral re­serve fund to its cap­i­tal.

The bank was re­cap­i­talised by the gov­ern­ment last year through is­suance of Trea­sury se­cu­ri­ties worth Ush100 bil­lion ($27.3 mil­lion) fol­low­ing a Ush164 bil­lion ($45 mil­lion) loss associated with for­eign currency trans­la­tion losses.

A de­pre­ci­a­tion of the Ugan­dan shilling against in­ter­na­tional cur­ren­cies has seen it post “trans­la­tion profit” this year, which was how­ever wiped out by in­ter­ven­tion costs in Crane Bank com­bined with a drop in op­er­at­ing in­come.

In­ter­est in­come dropped by 56.1 per cent to Ush72.2 bil­lion ($19.7 mil­lion) as a sre­sult of the de­cline of se­cu­ri­ties trad­ing. Fees and com­mis­sion earned fell by Ush9.2 bil­lion ($2.5 mil­lion) to Ush56 bil­lion ($15.3 mil­lion).


Prof Em­manuel Tu­musi­ime. File

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