Bagyenda forced us to buy Mbabazi bank, says Sudhir

Kampala. Kampala property mogul Sudhir Ruparelia made a shocking revelation yesterday when he told the parliamentary inquiry into closed banks that Ms Justine Bagyenda, the former Bank of Uganda director for commercial banks supervision, forced his Crane Bank (now liquidated) to take over National Bank of Commerce (NBC) which was also closed by the central bank.

The parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) is investigating alleged irregularities by Bank of Uganda in the closure of seven commercial banks.

Mr Ruparelia told Cosase that Ms Bagyenda called the then Crane Bank managing director, Mr A.R. Kalan, and directed the bank to take over the assets of NBC, a directive he said was contrary to the shareholders’ position.

“Crane Bank was not interested in acquiring the assets of NBC. Crane Bank did not bid to acquire these assets. Crane Bank was compelled to acquire these assets by Ms Bagyenda. She did this on telephone. She called the Crane Bank MD and informed us that she was directing Crane Bank to acquire these assets. She was not asking. It was an order from the authorities,” Mr Ruparelia told the inquiry.
He told the MPs that Crane Bank paid Shs1.2b to buy deposits, treasury bills and non-performing loans from NBC.
He further testified that NBC’s Bad Book was not transferred to Crane Bank and remained with Bank of Uganda. A Bad Book is a register where a bank’s loans are entered.
He said Bank of Uganda also retained the title for land in Kabale that Crane Bank paid for but never took over.
He said assets on the escrow account that belonged to NBC were also not transferred to Crane Bank but were retained by Bank of Uganda.
This week, former NBC shareholders told Cosase that Ms Bagyenda closed their bank even after they had raised the Shs7b the central bank had set as the requirement for capitalisation.
NBC shareholders said when NBC raised the Shs7b, Ms Bagyenda instead changed position and demanded that the money be invested in treasury bills and not capitalisation, forcing the bank to collapse.
Mr Ruparelia’s account reinforces the testimonies of Mr Mathew Rukikaire, the NBC Board chairman, and former Prime Minister Amama Mbabazi who have both testified that Ms Bagyenda acted illegally and arbitrarily when she closed their bank in September 2012.
Crane Bank shareholders also said they have never bought foreign exchange at a discounted price, contrary to the report by the Auditor General that shows that performing loans were transferred from NBC at Shs208m, representing 70 per cent of the book value.
The Auditor General’s forensic audit report says Crane Bank acquired NBC’s loan portfolio at a 30 per cent discount.
Although the forensic audit report that MPs are using to guide the investigation indicates that the transfer price for the NBC loans was agreed upon after negotiations with Crane Bank, the auditors made it clear that there were no supporting minutes to prove the negotiations and the agreement.
The auditors said that in the absence of such minutes, it was impossible to verify whether the NBC assets were transferred at a discount.

In their defence over the sale of NBC’s loans to Crane Bank, Bank of Uganda officials explained that estimating the recoverable amount of a closed bank’s loan portfolio cannot be done with precision because of uncertainty in the recoverable value and the costs related to recovery.