The Bank of Uganda has revoked the license of Merchantile Credit Bank Ltd and ordered the company to wind up its affairs.
Merchantile is a Tier II financial institution. Credit Institutions are described as “non-bank” financial institutions that engage in the acceptance of call and time deposits, repayable after a fixed period or after notice.
Deputy Governor, Dr Michael Atingi-Ego says the action taken under Sections 99 and 17(b) and (f) of the Financial Institutions Act 2004, was informed by poor governance and failure to meet the required capitalisation levels. This was putting customer deposits at risk, according to Dr Atingi-Ego.
“This action is necessary because the Bank of Uganda has determined that the continuation of Merchantile Credit Bank Ltd’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,” he said.
In the interests of the customers, BoU says it will, together with the Deposit Protection Fund (DPF), shortly inform all depositors of the arrangements to pay them back. According to the Act, the DPF insures deposits up to 100,000 shillings which it is expected to handle while the BoU will handle those higher amounts.
The uninsured portion of the deposits will be handled under Section 105 of the Financial Institutions Act 2004, as Amended, according to the DG.
All creditors are asked to submit their claims to the office of the Director, of Financial Stability at BoU within 30 days from today, Tuesday, while borrowers are directed to pay their loan balances at BoU headquarters or branches.
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