"First, the BOU did not take Shs 478 billion from an "undisclosed account". The BOU provided a loan to Crane Bank and this money came from the BOU's own resources. The BOU is a Central Bank and like any other Central Bank it can create financial assets and liabilities. In this case the BOU created a financial asset (the loan to Crane Bank) which was matched by an equivalent liability (an increase in the money supply)." the statement reads.
"Secondly, the claim that the BOU spent Shs 478 billion "under the cover of liquidity support" implies that the money was actually used for something else besides liquidity support. In fact, the vast majority of this money - Shs 466 billion - actually was liquidity support. Crane Bank had been losing liquidity for months prior to its takeover by the BOU.
This was because a large share of its loan portfolio was not being serviced by the borrowers and because customers were losing confidence in the bank and withdrawing their deposits. Between the end of June 2016 and the end of September 2016, Crane Bank's deposits fell by Shs 148 billion."
"In effect Crane Bank would have collapsed. Because Crane Bank was such a large bank, its collapse would have risked chaos in the financial system, possibly causing contagion to other banks and bank runs by depositors. That would have caused a huge amount of economic damage. No responsible Central Bank could allow this to happen. Apart from the Shs 466 billon of liquidity support to Crane Bank, the BOU also spent Shs 12 billion in resolving Crane Bank."
According to the governor, these were expenses that were necessary to ensure that the assets and liabilities of Crane Bank could be transferred to another bank, thereby allowing Crane Bank's customers to continue having access to normal banking services."
In any case, BOU, Mutebile says is recovering the Shs 200 billion of the Shs 478 billion through the sale of assets and purchase of assumption transaction which transferred assets and liabilities of Crane Bank to DFCU Bank.