The central bank has issued a directive stopping Crane Bank from issuing letters of credit, bank guarantees, bid bonds as well as place restrictions on new loans.The directive comes after the Bank of Uganda identified that there was a continued and significant erosion of capital. The apex bank took over the management of Crane Bank after reports that it was significantly overcapitalized and could become a risk to the overall banking system. These “special” arrangements with customers are reported to have contributed to the rise in Crane Bank’s non-performing loans, which were valued at 142 billion Uganda shillings, just about 40 million dollars, by the end of December 2015. Bank of Uganda’s decision to place restrictions on lending was reportedly meant to prevent the situation from escalating but customers now feel that access to capital has been restricted.
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