Well, sooner or later this report was bound to happen as the deadline of the Parliament’s Commissions, Statutory Authorities and State Enterprises (COSASE) report into 7 defunct banks in the Republic. It had to be interesting to see how the National Treasury or National Bank, the Bank of Uganda handled it, as the Bank have been going around all cowboy and not with protocol. As the proper guidance nor minutes have arrived to the COSASE as the months of investigations has gone on.
As well, the lack of trust between the parties, lawyers and stakeholders itself. Therefore, the report, had to stinking of it, the lack of due diligence and care for delivering proper craftsmanship, where the profession and their ethics are shining true.
Instead the process of investigation have shown utter contempt of honesty and transparency, as documents have gone missing and people have taken trips away, while they were supposed to testify to the Committee.
That is the introduction. Let’s dig into the mess, which was unleashed today on the 21st February 2019.
“The committee further observed that there are no documents relating to the post closure and management of Teefe Trust Bank assets and liabilities. This further complicates the process of winding up including resolving claims and some securities still in possession of the Central Bank” (COSASE, P: 9, 2019).
“No inventory report was availed in respect of ICB but an inception report for liquidation by the Liquidation Agcnt (KPMG) dated 30th September 2001” (…)”without a proper inventory report, BoU did not know what it was taking over in terms of entirety of assets and value. Accordingly, BoU acted in breach of section 32 (3), of the FIS, 1993” (COSASE, P: 10, 2019).
Sold on the Same Day:
What further the report states is that the National Bank of Commerce was closed and sold on the same day. This being done on the 27th September 2012. The takeover and sale took only 6 hours time and was in convention of the FIA. The same actions happen to Global Trust Bank (U) Limited, which was closed and sold on the same day, on the 25th July 2014. This was also done in convention of the FIA.
While on Crane Bank:
“The auditors produced the inventory report on 21st of December 2016 however, BoU had invited DFCU to bid for the purchase of assets and assumption of liabilities of CBL on 9nd December 2016 and subsequently DFCU submitted the bid on the 20th December 2016 a day before the production of the inventory report” (…) “BoU did not carry out valuation of the assets and liabilities of CBL. BUT relied on the inventory report and due diligence undertaken by DFCU to accept their bid to arrive at the P&A. However, the final inventory report was submitted on 13th January 2017. In essence, the final inventory report was never used in evaluating the bid for the purchase of assets and assumption of liabilities of CBL” (COSASE, P: 12 & 13, 2019).
Selling assets on discounts:
“In the case of ICB, Greenland Bank and Co-operative Brank, the total loan portfolio sold of UGX 135bn included secured loans of UGX 34.5bn which had valid legal or equitable mortgage on the real property and were supported with legal documentation BUT were sold, to M/s Nile River Acquisition Company at 93% discount” (…) “Whereas the GTB and NBC discount percentages of 20 and 30% respectively appear reasonable, the 93% discount in respect of the loan portfolio of ICB, Greenland Bank and Co-operative Bank acquired by M/s NRAC was incredibly outrageous” (COSASE, P: 23-24, 2019).
“The winding up process of all the defuct banks has taken an unjustifiably long time to settle creditor claims. For Teefe Trust Bank (26 years), Co-operative Bank (20 years), ICB (21 years), Greenland Bank (20 years), NBC (7 years), GTB (5 years) and CBL (2 years)!!! Regrettably, many of the creditors and shareholders have and indeed continue to die” (…) “Due to absence of documents, it was not possible to ascertain whether the UGX.9 1 .22bn used to settle customer claims of ICB, Cooperative bank and Greenland bank went to the bonafide beneficiaries. The absence of documents could among others be attributed to the long delay in concluding the winding up process” (COSASE, P: 39, 50 2019).
This is really just a proof of some of the mismanagement and quotes that proves how the Bank of Uganda didn’t do due diligence. They didn’t fix the issues, neither the work that was needed for the distressed financial institutions, the BoU didn’t follow the laws and statutes. All of the banks seems to be closed without protocol. Without proper documentation, neither overlooking assets and the securities.
Therefore, the Bank of Uganda … have not acted as the Central Bank and having the supervisory role over the financial market. They have surely acted in ill-will and not like they are supposed too. If not, these seven banks shouldn’t been closed like this, even closed and sold within 24 hours. Peace.
The Bank of Uganda (BoU) have during the last two weeks shown it blatant side and also its frauds to the public. As the acquisitions of failing Banks hasn’t been done with procedures or protocols. They have not acted in good faith. They have acted ill-willed and certainly not considering that their actions would be looked into. As they was the buffer for the state and the Movement itself. While they could monitor and configure the acquisitions of these failing banks.
That the leadership of the BoU are a proof of the how the state are triggering themselves on the common market. It is a rodeo, it is the Wild West, where the biggest head are getting the stakes and hopefully nobody will look into the transactions. That was until the Parliament and the Parliament’s committee on commissions, statutory authorities and state enterprises (Cosase) started to question the acts of the Bank. The realities of how the BoU has acted.
They can not hide it under the rug. This all is happening because the BoU couldn’t explain the transactions and trade-off with the recent Crane Bank. That is why they are looking into Greenland Bank, International Credit Bank, Cooperative Bank, Global Trust Bank and Teefe Bank. The BoU even sold three banks to Ghost Companies not existing, that was based on Mauritius. Which, shows how the leadership have failed their role or if not laundering money for the high above.
As well, as the most striking feature, is not only loosing the documentations for the COASE Committee in the recent takeover. But the evident acts of not having the assets, the inventory or even following any procedures doing so. What is worse, the lack of oversight or even critical eyes by the Parliament or even the Ministry of Finance, Planning and Economic Development (MoFPED), as these should have seen it coming. They should wonder why securities, the statutes and the banks was sold without the procedures and needed clearances. This to secure the clients and also the assets of the banks.
It is like they have closed into thin-air, in major heists of the elites, where the BoU have used their tools of disposal, to clear the tenant’s and their liabilities without any scrutiny. Clearly that has been the message, as the Banks have been lost, but been transferred to new homes. These homes has gotten the fortunes or their assets without the BoU could tell what they pushed further. Even selling it to companies not existing.
That the BoU have problems are clear, but they are like the state in general. Who has Ghosts everywhere and creates them for a reason. To hustle and create ghosts to earn more on non-existing projects, this has been there as long as Museveni have been president. It is just a proof of illicit and the problems of society in general. BoU is just a mirror of the administration, of the government and the backwards ways to grabbing money, while the honest are thieved.
The BoU have all been wrong, done it horrific and massively underestimated their history, their practices and the realities, which they now suffer. Certainly for a reason. If the President wants to get rid of one of the leaders within the Bank. This is the sort of scandal that clears the house. But these transactions and these sort of activity will not go away. As the elites and the Presidency has accepted this for decades. This has been done since before the millennium.
Therefore, it will be more skeleton released and show more disgraceful acts from the BoU. They have done it, because the regime has earned on it. If not these practices would have been gone long time ago. Then the Special Force Command would have ambushed the Bank and barricaded it. Peace.
Bank of Uganda’s late Annual Supervision Report of 2016 is finally out. Instead of mid-year, it was released in September. It must be reasons for that, since this is in the year two banks lost their balance and one was traded to another. The Crane Bank sale-off and losses have started most people, as also the expensive pens of the Bank. Therefore, with the procurement of pens must be the reason why the months from July to September to see the Annual report. The 2016 spreadsheet isn’t a fun read, it is dire and says something about the financial institutions, as well as the economy in general.
This report are telling stories of bad performing loans and the quality of them. When looking into that, you know that this is banking practice that supposed to be profitable. To loan money away that people save in the bank and gain interests. So, when the numbers are this crunching. When the state of affairs are so dire. When Government Securities and shortfall is what they are. Then you know there are failing prospects. As this the year after campaigns and elections. It is usually painful after the heavy spending and brown envelopes to anyone who support Mzee. That is why the costs and the non-performing loans are growing. But where that money went, is only known by the elite and the NRM. Take a look!
“The analysis of default by the banks’ three largest borrowers and an increase in NPLs by 200 percent revealed large potential losses. It showed that if each bank’s three largest borrowers were to default, with a loan loss of 100 percent, 13 banks would become under-capitalised with an aggregate capital shortfall of USh.513.86 billion. If NPLs were to increase by 200 percent, assuming the increase is in the loss category which requires full provisioning, 9 banks would become under-capitalised with an aggregate capital shortfall of Ush.247.39 billion. A decrease in interest income from government securities would not require any additional capital from the banks” (BoU, P: 4-5, 2017).
“The banking sector’s overall asset quality continued to decline in 2016. The ratio of non–performing loans to total gross loans increased from 5.3 percent in December 2015 to 10.5 percent in December 2016. The increase in the NPL ratio was mainly on account of bad loans which more than doubled from USh.573.4 billion in December 2015 to USh.1,203.2 billion in December 2016” (BoU, P: 15, 2017)
Earnings and Profitability:
“There was a drop in profitability of the banking sector in 2016. Annual after tax profits reduced by 44.2 percent or USh.239.1 billion from Ush.541.2 billion in 2015 to USh.302.1 billion in 2016. Average return on total equity (ROE) dropped from 16.0 percent to 8.3 percent while return on assets (ROA) halved to 1.3 percent during that period. Total expenses grew by 9.3 percent, mostly in the form of interest expense on deposits. Increased provisioning for bad debts also reduced the banking sector’s earnings for the year under review. Provisions rose by more than 100 percent, by USh.419.4 billion to reach USh.637.2 billion in 2016” (BoU, P: 16, 2017).
So this growth isn’t making the economy more healthy. It is more bad loans and losses of profits. The bankers are not benefit ting and the costumers will pay for the shortfall in the long run. The assets and the basic needs will not be covered. The dangerous levels of NPL can even kill of more banks. As the reports not spelling out the names, but saying 9 banks could be under-capitalised, that means the government has to come in with security to put the bank on its feet or trade it off. Like it did with the Crane Bank recently.
Therefore, there are warning signs of continuing to borrow without security for repayment on the debt. That gives way for non-performing loans. This is the whole idea and reason for the problems the 9 banks have. As the costumers and corporations borrowing funds, without capacity to repay. That means the planned interest, the planned profits and repaid funds disappear. So, the more borrowed funds to try to catch the losses, is creating a evil spiral of losses. Instead of generating the profits and interests as anticipated.
Clearly, the banking sector needs a revamp and the system needs a push to make sure they are run smooth. As the consequence of continuing like nothing, is that further banks will default and costumers will lose savings and the state has to cough-up funds to save the scraps of a bank. Peace.
Bank of Uganda – ‘ANNUAL SUPERVISION REPORT’ (December 2016) Volume 7 (06.09.2017)