Bank of Uganda which is facing a banking crisis has said Crane Bank will not be closed as people have been speculating. Governor Emmanuel Tumusiime Mutebile has issued a statement confirming that no bank will be closed.
“In spite of the fact that the Bank of Uganda took over management of Crane Bank; the bank will not be closed but we are seeking new investors who can boost the capital base of Crane.
There is no bank in our economy that is facing imminent closure. The banking sector is closely monitored and supervised to ensure that the financial institutions are well run and that depositors’ interests are safeguarded at all times.” Mutebile said.
Bank of Uganda on 20th October, 2016 announced that it had taken over management of Crane Bank because it was undercapitalized and presented a big risk to the economy. Bank of Uganda also suspended the board and the acting Managing Director.
Weak Supervision
Bank of Uganda has been criticized for failing to keenly supervise the banking sector. The governor Bank of Uganda before retracting his statement had confirmed that two banks were under their watch. He was responding to media reports that about seven banks were undercapitalized and were destined to be closed.
Financial experts are now wondering how financially unstable banks continue to operate under the watchful eye of the central bank. “It is surprising. How do banks who are not making money over the years continue to operate?”
“This puts people’s deposits at risk. Most of these banks are international; when they fail they return to wherever they came from but Ugandans will have lost their money.” a lecturer who teaches banking questioned.
While Mutebile didn’t say which banks are being watched, media reports this week suggested that Cairo International Bank, DFCU, United Bank of Africa, Bank of Africa, Diamond Trust Bank and Eco Bank were distressed.
In the case of Crane Bank, while Bank of Uganda said they noted problems in its banking system in September last year, it has not explained in depth how Crane Bank which has been reporting billions of profits for a decade ended in liquidity.
