Bank of Uganda closes Mercantile Credit Bank over low capital

Bank of Uganda (BoU) has ordered Mercantile Credit Bank Ltd to wind up operations over poor governance and failure to meet the required capitalisation levels. 

Mercantile is a tier II financial institution. Deputy governor, Dr Michael Atingi-Ego says the action taken under Sections 99 and 17(b) and (f) of the Financial Institutions Act 2004 after the institute put customer deposits at risk.

“This action is necessary because the Bank of Uganda has determined that the continuation of Mercantile 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 Shs 100,000 which it is expected to handle while the BoU will handle those higher amounts.

All creditors have been 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.

Source: The Observer

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