A concerned citizen has threatened to sue Bank of Uganda for what he describes as failure to supervise Crane Bank (CBL) before it was put under receivership.
The financial institution co-owned by wealthy property mogul Sudhir Ruparelia was taken over by the Central Bank in January 2017 on grounds that it was “undercapitalised” and “posed a systemic risk to the banking sector in Uganda.”
The bank was later sold to Dfcu bank following a forensic investigation into its operations.
A one Derrick Nsereko says in his ‘intention to sue’ letter that the central bank has since Crane Bank’s incorporation in 1995 supervised and regulated the financial institution pursuant to the Central Bank’s statutory mandate as set out in Sections of the Financial Institutions Act 2004 and other enabling legislation.
Through his lawyers Kashillingi, Rugaba & Co. Advocates, Nsereko argues the Central Bank has since 1995 regularly given Crane Bank a “clean financial bill of health” and reassured the general public of CBL’s sound financial standing.
“It will be recalled that sometime in 2016, the Governor of the Central Bank stated that Crane Bank had a clean financial bill of health. It now transpires that this was not entirely true,” said Nsereko on Wednesday night.
“These events clearly demonstrate that the Central Bank has either failed in exercising its statutory mandate in supervising the management and affairs of CBL or the officers of the Central Bank colluded with the management of CBL in doctoring reports of sound financial health of CBL,” he added.
“As a result of the Central Bank’s failings, neglect of duty or intransigence, CBL was largely owned by one individual contrary to the provisions of the FIA, had several fraudulent remittances undetected by the Central Bank, did not remit colossal amounts of money to the National Social Security Fund thereby depriving workers of their retirement benefits inter alia.”
Bank of Uganda Communications Director Christine Alupo has since maintained the institution’s position of not commenting on a matter before court.
Bank of Uganda recently took Sudhir to the Commercial Court on allegations of causing fraud at the bank estimated at $92m.
Sudhir is yet to file a response to the accusations leveled against him but his lawyers have vowed to put up a strong defence.
Sources at BoU said they would at the right time explain their position on the alleged negligence.
In his petition sent to the Central Bank governor, Tumusiime Mutebile and also copied to the Director Bank Supervision Justine Bagyenda, Nsereko said he “intends, within three working days from the date hereof, to institute a suit against the central bank, seeking declaratory orders on failure to supervise CBL, collusion, corruption and fraud in the issuance of clean financial health bills in respect of CBL and other relief.”
He added: “Clearly, the failure in carrying out this statutory duty implies that the entire Banking and Financial sector in Uganda is at risk in the hands of the central bank as presently constituted, manned and managed.”
He also vowed to engage the Inspector General of Government and the Uganda Police to “commence criminal investigations and proceedings against officers of the Central Bank in this matter of great public and generally importance and a failure to uphold the law of this land.”