Uganda: IMF Wants Bank of Uganda to Strengthen Supervision

Jul 19, 2017 | The Monitor; All Africa

Last week, the International Monetary Fund (IMF) provided details on why it wants Bank of Uganda (BoU) to strengthen the supervision of commercial banks, in order to avoid the Crane Bank-like scenario.

In a detailed 2017 Article IV Consultation and Eighth Review Staff Report, the IMF notes that BoU needed to interrogate more financial reporting by banks in order to avoid instances where banks fail the compliance test. Specifically, the Fund points out that the Crane Bank situation could have been avoided. "Staff also notes that the quality of banks' reporting is a risk to the validity of the stress test results, as the Crane Bank episode has illustrated. The authorities agree that the experience calls for more intrusive supervision, and explained that they are also focusing on banks' risk management frameworks," the staff report reads, in part. Crane Bank takeover In October 2016, BoU took over the operations of Crane Bank after the capital of Shs220b had been eroded due to high levels of Non-performing Loans (NPLs). Crane Bank faced liquidity problems and was struggling to meet demands of depositors and could not access funds lend. The IMF, after interactions with BoU, found out that Crane Bank had been underreporting in its financial statements. "Crane Bank had underreported its NPLs, and there were other problems with its financial reporting. Facing a steady deposit outflow, the bank was close to being illiquid, with signs of asset stripping. The ensuing corrections to the financial statements contributed to the worsening of financial soundness indicators of the banking sector," the report further reads. Read more on All Africa. Source: All Africa