Parliament — The circumstances under which Bank of Uganda (BoU) sold assets of closed banks at 93 per cent discount to a now defunct offshore company registered in Mauritius remain unresolved after the central bank officials yesterday failed to table documentation defending the sale.
An audit report before the Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) indicates that BoU sold assets worth Shs64b of five defunct banks-International Credit Bank (ICB), Greenland Bank, Cooperative Bank, Global Trust Bank and National Bank of Commerce at a discount of 80 per cent and realised Shs32b.
For ICB, Greenland Bank and Cooperative Bank, the report says the total loan portfolio of Shs135b, which had valid, legal or equitable mortgage and was supported with legal documentation, were sold to Nile River Acquisition Company at a 93 per cent discount.
The selling of the loans to Nile River Acquisition Company has become a particular source of interest because the firm was incorporated in Mauritius on September 26, 2007 as a global business, the same year BoU officials sold the assets of the three banks.
Missing company directors
BoU officials yesterday also failed to disclose particulars of the directors of the offshore company and the committee chairperson, Mr Abdu Katuntu, asked the central bank to justify why it decided to sell the loan portfolio at 93 per cent.
"Why did you do take that decision; bring the minutes? Who took it and what is the basis of that decision and you need to go to the details of that decision? We have had loans discounted by 93 per cent and we want to know the basis of that decision and that basis can only be by a proper evaluation and we need the documentation," Mr Katuntu said.
Mr Benedict Ssekabira, the BoU Director for Financial Markets Development Coordination, promised that documentation regarding the sale of loans to Nile River Acquisition Company is available and will be presented to the committee today.
Busiro East MP Medard Sseggona questioned the logic of selling loans at a discount after adding them together, and inquired why they were not sold differently.
"I want to know why somebody would not buy a loan at book value even when it is not performing. What is it that prompted BoU to lump up all these loans? Where is the wisdom of Bank of Uganda lumping the loans and selling them all together?" Mr Sseggona said.
Mr Tumubweine Twinemanzi, the BoU Director for Commercial Banks supervision, said the central bank sold loans at a discount because buyers of loans for closed banks cannot pay the real value.
"Any buyer of loans would be unwilling to pay the full bank value and it is inevitable the loans will be sold at a discount. Estimating the recoverable value cannot be done with precision, it is shroud in uncertainty. No buyer of a loan would buy loans of a closed bank and its full book value," Mr Twinemanzi told the committee.