Inquiry. Forensic audit investigations are being carried out.
Crane Bank may have been sold to dfcu Bank but all may not be over for the former top management and shareholders of the bank. On Friday, Bank of Uganda (BoU) revealed that they were now carrying out a forensic audit to establish why the bank became significantly undercapitalised in a space of less than a year.
“There was a loss. So what do you do? Now you have to ascertain how this loss came up. In order to ascertain this, you carry out a forensic investigation because you want to know; why the loss, who caused the loss and what course of action should you take in case you find out whether there were people involved. The investigation will have numbers as well as legal implications,” Ms Justine Bagyenda, the executive director supervision at BoU, said on Friday.
Forensic audit investigations are often carried out in order to evaluate whether there is enough information to bring the matter to court for criminal proceedings.
Some of the issues forensic audits ascertain are whether there was fraud, embezzlement, excessive insider lending, weak corporate governance and whether financial claims can be made against the individuals responsible.
BoU is yet to establish the individuals who could be prosecuted because the forensic audit is not yet complete.
According to Ms Bagyenda, the forensic investigations are expected to be completed within a month.
However, Daily Monitor understands that a draft report had been completed which identified areas where further investigations will be required to establish which individuals were responsible for causing the massive erosion of capital.
Some of the issues that have been identified include poor loan appraisals and follow-ups, insider lending, the suspicious filing of financial reports and the transactions with related companies of the Ruparelia Group. On Friday, Mr Emmanuel Tumusiime-Mutebile, the BoU governor, told journalists that an independent external auditor had established.
“Crane Bank’s liabilities, as at October 20, 2016, being the date of the takeover, grossly exceeded its assets and that it was insolvent, which insolvency has continued to date,” he said
Insolvency arises when a company, in this case, Crane Bank lacks the financial capacity to meet its obligations.
By October 2016, Crane Bank could even no longer access money in the interbank market from other commercial banks because of concerns about its ability to finance those borrowings.
That in part explains why BoU had to inject about Shs200b liquidity in the three months when BoU was operating Crane Bank.
In Crane Bank’s 2015 financial statements, they indicated that they had assets of Shs1.8 trillion and liabilities of about Shs1.6 trillion, of which Shs1.3 trillion were deposited from customers.
Crane Bank was controlled by the Sudhir Ruparelia family at 47 per cent, with MS White Sapphire, a company domiciled in the Mauritius, holding 46 per cent of the shares.
trend of events
September 2015. BoU stress test reveals Crane Bank facing capitalisation issues and informs management and the directors to resolve the issue.
March 2016. External auditors hired by Crane Bank conclude the 2015 annual audit and submits to the directors and management. Audit results reveal a Shs3 billion loss and NPL portfolio of Shs120b.
May 2016. Crane Bank publishes its financial statements for 2015, a day after the deadline for publishing results
June 2016. BoU directs Crane Bank to halt issuing letters of credit, guarantees and overdrafts. They also ask Crane Bank director to recapitalise the bank.
August 2016. BoU raises red flag on the capital structure of the bank and informs shareholders of the need for more capital or else they will take over the bank.
October 2016. BoU takes over management of Crane Bank December 2016 – BoU calls for expressions of interest from interested parties to acquire Crane Bank.
January 2017. BoU starts receiving bids from potential buyers
Crane Bank is placed under receivership after audit concludes the bank is insolvent
dfcu Limited acquires the assets and liabilities of Crane Bank.