BOU to begin Crane Bank liquidation, but lawyers say it is illegal

By Samuel Muhimba

Bank of Uganda Governor, Emmanuel Mutebile has ordered for liquidation and winding up of the affairs of defunct, Crane Bank Ltd (CBL) a move that has been criticised by some lawyers as illegal since the central back has no legal status to act as receiver for Crane Bank.

Bank of Uganda (BoU) took over management of Crane Bank Ltd. (CBL) on October 20, 2016 and subsequently progressed it into receivership on January 24, 2017.

“In exercise of its powers under section 99 (1) & (2) of the Financial Institutions Act, 2004, BoU has now placed CBL under liquidation and ordered the winding up of its affairs” Mutebile ordered in notice dated 13th November 2020.

What the development means to borrowers of defunct Crane Bank

Mutebile says all borrowers of CBL, whose loans were transferred to DFCU Bank under the purchase of assets and assumption of liabilities agreement between CBL (In Receivership) and DFCU Bank Ltd, must continue to service their loan obligations with DFCU Bank Ltd.

On the hand, all other borrowers of CBL, whose loans were not transferred to DFCU Bank, must service their loans by paying into the designated collection accounts at Bank of Uganda.

“CBL borrowers, whose loans were not transferred to DFCU Bank Ltd., can access a statement of their indebtedness from the office of the Director Commercial Banking at Bank of Uganda headquarters” Mutebile further says.

Creditors of CBL will be notified of the procedure for presentation of their claims to the liquidator according to the notice.

“Bank of Uganda reassures the public that it will continue to protect depositors’ interests, ensure discipline among managers and shareholders of Financial Institutions, and maintain overall stability of the financial sector”- Mutebile.

Lawyers say move is illegal

However legal experts said the Bank of Uganda move is illegal because the central bank lost legal authority over the bank in 2018 as confirmed by two court rulings.

"Both the High court and the Court of Appeal found that the receivership of Crane Bank Limited ended in January 2018. This means that after the date Bank of Uganda has no authority to make any decision of any kind for Crane Bank," one of the lawyers said.

The lawyer said after receivership in 2018, the bank was returned to its board of directors and shareholders.