Parliament move to probe BoU over defunct Crane Bank

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PARLIAMENT. A select committee of Parliament will be set up to investigate suspected “collusion, corruption, insider trading and fraud” at Bank of Uganda (BoU) in relation to the collapse of Crane Bank if a proposed motion by legislators is approved by the House.

Three MPs on Thursday tabled a motion demanding that a select committee be instituted to carry out a broad inquiry into the operations of BoU and how it monitors commercial banks with particular interest in how Crane Bank collapsed as the central bank watched on.

The petitioners want technocrats and the political leadership at the Finance ministry investigated over a letter of comfort worth Shs200b that was issued to defunct Crane Bank and BoU to explain whether the Shs400b given out to support the liquidity of Crane Bank has since been recovered.

The proposed committee will also investigate whether Section 18(2) of the Financial Institutions Act was offended when Crane Bank transferred shares worth more than 5 per cent to one person without authority from BoU as stipulated by the law.
Budadiri West MP Nandala Mafabi, the lead petitioner, told Parliament that 47.3 per cent shares in Crane Bank were transferred to a Kenyan national whom he said got money from Crane Bank to buy the same shares.

Mr Sudhir Ruparelia’s family, Mr Mafabi told MPs, controlled 48.6 per cent of the shares in the collapsed Crane Bank. The Financial Institutions Act stipulates that a single shareholder should not control more than 49 per cent shares in one financial institution.
“It is clear that there were dealings which BoU officials must have seen. There are many things which show that BoU and Finance ministry officials had an interest because of the social investment by the leaders of Crane Bank. The man [Mr Ruparelia] invested in social capital and the bank became untouchable,” Mr Mafabi said.

Igara West MP Raphael Magyezi said the committee should investigate why the defunct Crane Bank paid dividends of more than Shs120b to its shareholders in 2014 contrary to Section 32 of the Financial Institutions Act (FIA) that guides on how financial institutions share dividends.

“Didn’t BoU know that sanctions had to be applied if such a bank by 2010 had non-performing loans of 2.5 per cent compared to the average industry of 3.9 per cent? By 2015, the bank had non-performing loans of 22 per cent compared to the average industry of 7 per cent,” Mr Magyezi said.
The dealings between Crane Bank and Meera Investments would also be investigated.

The envisaged committee will also investigate Ernst & Young, an audit firm that carried out audits on Crane Bank and gave it a clean bill of health while Masembe, Makubuya, Adriko, Karugaba and Ssekatawa advocates will be probed for alleged “impropriety” in handling of a suit BoU has slapped on the former Crane Bank.
Deputy Speaker Jacob Oulanyah will on Tuesday rule on how to proceed with the motion a after it emerged that Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises is interested in carrying out a similar probe.

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