BoU closes Mercantile Credit Bank Ltd
Mercantile Credit Bank Ltd.’s license has been revoked by the Bank of Uganda, which also instructed that the business wind down. Mercantile is a Tier II financial institution. Credit institutions are defined as “non-bank” financial organizations that take call and time deposits, which must be repaid either with notice or after a predetermined amount of time.
According to Deputy Governor Dr. Michael Atingi-Ego, inadequate governance and a failure to meet capitalization requirements were the driving forces behind the action taken under Sections 99 and 17(b) and (f) of the Financial Institutions Act 2004. Dr. Atingi-Ego claimed that this was endangering consumer deposits.
“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.
BoU claims that in the best interests of its clients, it would soon notify all depositors of the repayment plans in collaboration with the Deposit Protection Fund (DPF). The Act states that the DPF is supposed to handle deposits up to 100,000 shillings, with the BoU handling larger amounts.
According to the Deputy Governor, the uninsured component of the deposits would be handled in accordance with Section 105 of the Financial Institutions Act 2004, as amended. Borrowers are instructed to settle their loan balances at BoU headquarters or branches, while creditors are advised to submit their claims to the office of the Director, of Financial Stability at BoU within 30 days of today, Tuesday.
