Dfcu Defends Crane Bank Acquisition Before Parliamentary Committee

This week several witnesses have appeared before the parliamentary committee on Commissions, Statutory Authorities and State Enterprises (Cosase) in Uganda to answer questions relating to events surrounding the closure of seven commercial banks between 1993 and 2016.

Among those to appear were dfcu Bank, who have defended the transaction in which they took over Crane Bank Limited (CBL). Crane Bank was the third largest bank in Uganda but it became insolvent, resulting in a Shs 450bn injection by Bank of Uganda (BoU). The bank was subsequently taken over by the BoU in October 2016 in order to ensure its financial stability. An agreement with dfcu bank was then fostered, and CBL was sold to dfcu in 2017, with the bank taking on some assets, customer deposits and various liabilities.

After the BoU filed a lawsuit against former CBL owner and major shareholder Sudhir Ruparelia and his company Meera Investments for the alleged swindling of Shs 397 billion from the bank in fraudulent transactions and transfers, a number of attacks on dfcu began to emerge in an apparent attempt to discredit the transaction. The former shareholders claim that the bank was illegally, unprofessionally and unfairly destroyed by BoU officials.

In defending the acquisition dfcu stated that they had enabled a smooth transition for customers and ensured the stability of the sector was maintained. Prior to the transaction dfcu claim to have undertaken due diligence on the bank, as well as drawing on the inventory of assets, liabilities and equity of the bank that was compiled by PWC in October 2016. Among their reported findings were that CBL’s net asset position was negative and that the bank had faced significant liquidity challenges prior to its takeover by the BoU. Other discrepancies and challenges were also noted, from currency mismatches on the balance sheet to a high number of non-performing accounts.

Dfcu’s defence puts the pressure back on the CBL shareholders to explain the challenges identified, with a number of specific flags raised regarding the bank’s operations under its former ownership. As the dfcu’s Jimmy Mugerwa told the Committee, prior to its acquisition CBL concentrated on high-risk products in apparent violation of the Financial Institutions Act.

Other banks covered by the investigations of the Committee include Teefe Trust bank, International Credit bank ltd, Greenland bank, Uganda Cooperative bank, National Bank of Commerce, and Global Trust bank.