Bank of Uganda Governor Emmanuel Tumusiime Mutebile says the blowing of Shs 478 billion stories is “seriously misleading.” According to Mutebile, claims that Bank of Uganda (BOU) spent Shs 478.8 billion from an undisclosed account in the Central Bank under the cover of liquidity support is erroneous.
He said “First, the BOU did not take Shs 478 billion from an “undisclosed account”. The BOU provided a loan to Crane Bank and this money came from the BOU’s own resources. The BOU is a Central Bank and like any other Central Bank, it can create financial assets and liabilities. In this case, the BOU created a financial asset (the loan to Crane Bank) which was matched by an equivalent liability (an increase in the money supply).” the statement reads.
“Secondly, the claim that the BOU spent Shs 478 billion “under the cover of liquidity support” implies that the money was actually used for something else besides liquidity support. In fact, the vast majority of this money – Shs 466 billion – actually was liquidity support. Crane Bank had been losing liquidity for months prior to its takeover by the BOU.
Mutebile says as Crane Bank’s liquidity drained away, the bank requested liquidity support from the BOU before the bank was taken over by BOU.
Mutebile also added that, If the BOU had chosen the latter course of action, Crane Bank would have been unable to honor its liabilities. It would not have been able to pay depositors who wanted to withdraw their money from the bank or repay the money it had borrowed from other banks in
In any case, BOU, Mutebile says is recovering the Shs 200 billion of the Shs 478 billion through the sale of assets and purchase of assumption transaction which transferred assets and liabilities of Crane Bank to DFCU Bank while other sums will be recovered from Crane Bank’s shareholders, who BOU says was responsible for the bank’s huge losses.