The Minister of Finance, Matia Kasaija has likened the decision that was taken by Bank of Uganda (BOU) to close Crane Bank to a doctor that poisons a patient that is fighting to survive instead of resuscitating them.
The Minister was Friday appearing before the Parliament Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) to respond to the concerns raised by legislators on the closure of the seven defunct commercial banks.
The Minister was as well asked to comment on the fact that Bank of Uganda would go ahead and close down Crane Bank and National Bank of Commerce (NBC) yet they had the potential of saving the banks through liquidity support.
It should recalled that NBC was closed on grounds that it lacked liquidity of Shs 300m despite having been able to raise Shs 7bn within a period of only four days.
Earlier this week, the shareholders of Crane Bank told legislators that despite several attempts to revive their bank from the alleged liquidity inefficiency, BOU went ahead and closed it without offering any support but rather frustrating their efforts to survive.
The former Board Chairperson, Crane Bank, Joseph Biribonwa told the members that the shareholders took a four-pronged approach to try and resolve the liquidity crisis which included; more aggressive debt recovery, enhanced search for equity partners, inter-bank borrowing and borrowing from BOU.
“CBL sought for a loan from BOU and first offered its branches as security however they were rejected by BOU. On 17th October, 2016, BOU responded and offered a loan worth Shs 79.2bn at an interest rate of CBR plus 5 percent margin though BOU wanted only third party properties as security and rejected the branches,” Biribonwa said.
He noted that despite agreeing to all conditions that were put up by BOU to avail them the loan, they were surprised that BOU took over the management of CBL on the October 19, 2016 at 11:49pm.
“It is worth noting that BOU gave DFCU an interest-free loan, however, it rejected the CBL’s request for the same loan facility three months earlier,” Biribonwa said.
Upon learning of these facts on Friday, Minister Kasaija wondered why BOU would close such banks that were doing all it takes to get themselves out of the liquidity crisis.
“We are wondering, here is a local bank that requires some help, you give it a conditions to raise some money and they raise the money, but you go ahead to close them, are you giving the local bank a chance to survive?” Kasaija wondered.
“It is very unfortunate that there is a patient who is still breathing and you as a doctor, you give him some poison to finish him off. This is a very unfortunate incident, I don’t want to condemn myself but I will condemn myself in the strongest term,” the Minister added.
During Friday’s interface with COSASE, the Minister was together with officials from the Central Bank including the BOU Governor, Tumusiime Mutebile and his deputy, Louis Kasekende.
“Me I thought, the best way to do things is to see if the bank has any chance to survive and then we do anything possible to make it survive,” the Finance Minister told the committee.