The Bank of Uganda Takes Swift Action Against Mercantile Credit Bank Ltd

In a move aimed at protecting the interests of depositors and maintaining the stability of the financial system, the Bank of Uganda (BoU) has revoked the license of Mercantile Credit Bank Ltd, a Tier II financial institution.

The decision, taken under Sections 99 and 17(b) and (f) of the Financial Institutions Act 2004, comes after the bank failed to address significant undercapitalization, poor corporate governance, and insolvency, putting customer deposits at risk.

According to Deputy Governor Dr. Michael Atingi-Ego, the BoU has determined that the continuation of Mercantile Credit Bank Ltd’s activities would be detrimental to its depositors. The bank’s inability to resolve its capitalization issues and poor governance structure led to this decisive action.

“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.

To safeguard the interests of customers, the BoU, in collaboration with the Deposit Protection Fund (DPF), will inform depositors of the arrangements for reimbursement. The DPF insures deposits up to 100,000 shillings, while the BoU will handle larger amounts. The uninsured portion of deposits will be handled under Section 105 of the Financial Institutions Act 2004, as Amended.

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All creditors are required to submit their claims to the Office of the Director of Financial Stability at BoU within 30 days, while borrowers must settle their loan balances at BoU headquarters or branches. This swift action demonstrates the BoU’s commitment to maintaining the integrity of the financial system and protecting depositors’ funds.

The revocation of Mercantile Credit Bank Ltd’s license serves as a reminder to financial institutions of the importance of adhering to regulatory requirements and maintaining sound governance practices.

The BoU’s proactive approach ensures that the interests of depositors and the broader financial system are safeguarded. As the banking regulator, the BoU remains vigilant in its oversight role, ensuring that financial institutions operate in a safe and sound manner.