BoU: National Bank of Commerce Was in Financial Mess

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In short
National Bank of Commerce (NBC) which was closed on Thursday and immediately taken over by Crane Bank was in dire financial constraints, according to Bank of Uganda.

National Bank of Commerce (NBC) which was closed on Thursday and immediately taken over by Crane Bank was in dire financial constraints, according to Bank of Uganda.
Deputy Governor Louis Kasekende told journalists in Kampala that NBC, which was owned by powerful ministers and individuals from Kigezi rgion, has been suffering financial distress for more than two years.
Kasekende said since the middle of 2010 NBC had incurred continuous losses with half of its loans not performing.
The Deputy Governor said since 2008 NBC achieved no growth and its market share of deposits had fallen to 0.08 percent, making it the worst performing of the 25 commercial banks in the country.
Kasekende said that had NBC remained in operation, its losses would have continued to mount which would eventually have depleted its deposits.
Records show that by the time of the bank’s closure, its share capital had fallen dramatically from 10 billion shillings to 9.2 billion shillings.
This happened just a few days when the central bank forced NBC, whose share capital had been at seven billion shillings, to increase it to 10 billion if it wanted to remain in operation.
Currently, all commercial banks in Uganda are mandated to have a minimum capitalization of 10 billion shillings. But come March 1st 2013, all commercial banks will be mandated to capitalize to the minimum of 25 billion shillings.
The deputy governor said disputes between the bank’s major shareholders proved to be a serious obstacle to effective governance and management and public confidence in the bank.
The dispute pits the banks majority shareholders including Prime Minister Amama Mbabazi, Minister Ruhakana Rugunda and businessman Amos Nzeyi against 320 minority shareholders led by former Supreme Court judge Professor George Kanyeihamba. The latter accuse the former of unilaterally changing the bank’s shareholding and its name from Kigezi Bank of Commerce to National Bank of Commerce.
Kasekende said closing the bank before further losses were incurred ensured that there are still sufficient sound assets in the bank to cover all its deposits allowing them to be paid in full.
The deputy governor said Bank of Uganda made repeated efforts to persuade NBC’s shareholders to take remedial actions necessary to restore the bank to financial viability as well as resolving its shareholding dispute in vain.
On why it was Crane Bank and no other bank which acquired NBC, Kasekende said word was sent out to all banks but only Crane Bank offered a smooth transfer which will not impact on the depositors.
He explained that as a result all NBC customers will be able to transact business through Crane Bank and former NBC branches starting October 1st this year.
The Bank of Uganda executive director in charge of supervision and regulation, Justine Bagyenda, said they make constant assessment of commercial banks to ensure safety of depositors.
Bagyenda said former NBC depositors will be able to transact business on the same terms as before, dispelling fears that Crane Bank might institute its own new terms.


About the author

David Rupiny
In his own words, David Rupiny says, "I am literally a self-trained journalist with over 12 years of experience. Add the formative, student days then I can trace my journalism roots to 1988 when as a fresher in Ordinary Level I used to report for The Giraffe News at St Aloysius College Nyapea in northern Uganda.

In addition to URN for which I have worked for five years now, I have had stints at Radio Paidha, Radio Pacis, Nile FM and KFM. I have also contributed stories for The Crusader, The New Vision and The Monitor. I have also been a contributor for international news organisations like the BBC and Institute for War and Peace Reporting. I am also a local stringer for Radio Netherlands Worldwide.

I am also a media entrepreneur. I founded The West Niler newspaper and now runs Rainbow Media Corporation (Rainbow Radio 88.2 FM in Nebbi). My areas of interest are conflict and peacebuilding, business, climate change, health and children and young people, among others."