Bank of Uganda (BoU) has taken over Crane Bank, the country's third largest bank, ending months of speculation about its financial status.
"This is to inform you that the Bank of Uganda has with effect from today, 20th October 2016, pursuant to Sections 87 (3), 88(1) (a) & (b) of the Financial Institutions Act 2004, taken over Crane Bank LTD," BoU Governor Emmanuel Tumusiime-Mutebile said in a brief statement.
In a hastily organised press conference thereafter, Mutebile explained that the "action was taken upon determination that Crane Bank Limited is a significantly under-capitalized institution and this poses systemic risks to the stability of the financial systems."
Mutebile added that the continuation of Crane Bank activities in the current form is detrimental to the interests of its depositors. He adds that “Accordingly, Bank of Uganda has appointed a statutory manager of the affairs of the Bank and suspended its Board of Directors.”
Mutebile however assured the public that Crane Bank will remain open and operations will continue normally but under the management and control of the Central Bank until an alternative investor for the bank is identified.
With a coverage of 46 branches across the country, Crane Bank has an asset base of 1.79 trillion Shillings.
According to the Central Bank, the problems within Crane Bank were first detected at the end of September 2015 after regular examination indicated that there was significant under-capitalization of the bank.
This was also confirmed in the auditor's report of 2015 indicating that the Bank reported a consolidated pre-tax loss of over 7 billion Shillings during the year as a result of an increase in expenses and losses on loans and advances. This was a contrast of its 57 billion Shillings profits recorded in 2014.
Justine Bagyenda, the executive director for supervision explains that a bank is declared as significantly under-capitalized, when its level of capitalization is less than 50 percent of the statutory requirement of 25 billion Shillings.
The central bank governor explains that the problem was partially caused by a number of bad and doubtful loans that could have undermined the performance of the bank. He however adds that the management of the Bank takes a share of the blame for the crisis.
Meanwhile, there is a visible rush of depositors withdrawing their savings from the bank since the time of the first announcement. All Crane Bank branches across the country are now heavily guarded by police personnel.
In Mbarara, Chris Namutt, the branch Manager says that the police deployed around the bank but claims not to be aware of the reason for deployment. The bank however remains open.
In Masaka the queue is slowly building up with depositor's line up both in the banking hall at the automated teller machines to withdraw their savings with the bank. Mahdi Ssenkabirwa, a resident of Masaka says he has withdrawn all his money for fear that the Bank may eventually close down. He says the takeover by Central Bank means there is a problem.
But only one out of 15 tills inside the bank is operating. The foreign exchange counter is also closed. The attendant told Uganda Radio Network that she could not give out any money.
However, the branch management of the bank said the Bank is operating normally.
In Gulu, business is progressing normally at the bank. By the time of filing this report, a group of bankers from Kampala had arrived at the branch. The bank's clients however seem ignorant about the changes.
Thomas Ojok, a client was surprised at the news but hastened to add that he is grateful to know that the Central Bank is working hard to protect customers. Private security has been deployed alongside armed police personnel at the branch.
In Soroti, the Branch located along Mbale road, is now guarded by six armed police officers and four private security guards, a rather unusual scene at the facility.
A front desk manager at the Branch told Uganda Radio Network that the branch recorded the highest volume of withdrawals today, based on speculation about the status of the bank. He however says that there is no need for panic.
In Hoima, only one teller is available out of the usual eight. By the time of filing the report there were only two staff inside the bank which at the moment is guarded by Two police officers and two private security guards.
The construction site of the branch in Masindi has also been deserted.
In Luweero, Business was normal by press time. By the time URN reporter visited the bank at 4:30pm, only two clients were making withdraws from the tellers. There was no client at the ATM.
One of the client told URN that he was not yet aware of the takeover by BOU. The branch still carries an earlier disclaimer at the entrance dismissing the pending closure of the bank. However unlike before the bank is now guarded by two police officers deployed at the entrance. Before the takeover, the bank was only guarded by private guards.
Crane bank opened up Luweero branch in 2015 but was still struggling to attract clients by the time of the takeover.