Bank of Uganda closes another financial institution over insolvency

Mercantile Credit Bank Limited Management team and DPF Team pose for a photo after the meeting.

Mercantile Credit Bank Limited Management team and DPF Team pose for a photo after the meeting.

Bank of Uganda has closed Mercantile Credit Bank Limited (MCB), a tier II financial institution, due to poor financial standing, marking the second closure of a financial institution by the regulator this year. In January, BOU closed EFC Uganda Limited, a microfinance company, due to similar reasons.

BOU’s decision, which also places Mercantile Credit Bank, located on Old Portbell Rd, under liquidation, revoked its license, and ordered the winding up of its affairs, effective today, Tuesday.

“The continuation of Mercantile Credit Bank Limited’s activities is detrimental to the interests of its depositors due to the institution’s failure to resolve its significant undercapitalization, poor corporate governance, and insolvency,” said Michael Atingi-Ego, Deputy Governor of the Bank of Uganda.

“The Bank of Uganda has determined that the closure of Mercantile Credit Bank Limited is necessary to protect the interests of its depositors and maintain the stability of the financial system,” Atingi-Ego added.

“The regulator will do everything necessary to ensure a smooth resolution of this matter and protect the interests of all stakeholders,” he assured.

“The Deposit Protection Fund of Uganda (DPF) will work with us to inform depositors of the arrangements to access their insured deposits,” Atingi-Ego explained.

“The uninsured portion of the deposits will be handled in accordance with Section 105 of the Financial Institutions Act 2004, as amended,” he added.

“All creditors have 30 days to submit their claims to the Office of the Director, Financial Stability, Bank of Uganda,” Atingi-Ego said.

“Borrowers are directed to continue servicing their loans by making payments at Bank of Uganda offices and its branches as shall be advised,” he directed.

The closure of Mercantile Credit Bank Limited and EFC Uganda Limited highlights the regulator’s commitment to enforcing prudential regulations and ensuring the stability of Uganda’s financial system.

“We urge all stakeholders to cooperate with us during this process,” Atingi-Ego appealed.

MCB was registered as a Merchant Bank in 1981 and commenced operations in 1986. Following the review of the banking laws in Uganda that led to the financial Institutions Act of 2004, MCB was categorised as a Tier II Institution. As a tier II financial institution, MCB is allowed to establish customer savings and fixed deposit accounts and other core banking products including provision of credit facilities, fund transfers and foreign exchange trading given the nature of its licence.

As of December 2011, the bank’s total assets exceeded US$6.6 million (UGX:16.5 billion), with shareholders’ equity of approximately US$1.6 million (UGX:4 billion). In December 2012, the total assets were estimated at US$9.9 million (UGX:25 billion) following its growth in operations.


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