BoU not obliged to liquidate distressed Commercial Banks – Mutebile on DFCU - Daily Post Uganda

BoU not obliged to liquidate distressed Commercial Banks – Mutebile on DFCU

Bank of Uganda governor Prof Emmanuel Tumusiime-Mutebile

KAMPALA – The Bank of Uganda Governor Emmanuel Tumusiime Mutebile has said his bank will not give any credit to distressed commercial banks.

Mutebile while addressing the Uganda Bankers’ Association Annual Bankers’ Conference at the Kampala Serena Hotel said in order to protect the interests of a distressed bank’s depositors, the regulator has a responsibility to intervene promptly in a bank that is severely undercapitalized or insolvent, and, if necessary, to take over the bank and resolve it.

The governor narrated that BoU has no obligation to bail out a distressed bank by providing it with liquidity support, in the hope that it will somehow be restored to financial health.

“Such an option would be extremely dangerous. It would allow the distressed bank to continue being mismanaged in the same manner that caused it to become distressed, thereby incurring further losses at the taxpayers’ expense”. Mutebile remarked.

He added that this would also send a signal to all participants in the financial markets that mismanagement carries no consequences for the owners and managers of banks.

His remarks followed after DFCU bank officials ran to the Bank of Uganda for a crisis meeting and requested the Central bank to put a lien on treasury bills and help them borrow money to enable them run business.

The bank reportedly wanted rescue after reaching a limit on interbank lending.

In 2017, DFCU bank acquired Crane bank from Bank of Uganda for a paltry Shs200 billion yet its value at the time of takeover by BoU was Shs1.3 trillion, to their detriment.

One year down the road, the bank has been struggling to sustain business country wide.

Officials say the bank was too weak to manage all the branches across the country and was only interested in its bad books which were worth about shs650billion”. He said

DFCU bank has also seen massive resignations of its top management bosses including the Executive Director William Sekabembe, board member also banks largest shareholder Malik Deepak the CEO Arise BV and CDC Group which sold its shares with the bank


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