BOU closes Mercantile Credit Bank over financial instability

All creditors are required to submit their claims to the Office of the Director, Financial Stability, Bank of Uganda, within 30 days

The Bank of Uganda (BOU) has closed Mercantile Credit Bank Limited (MCB), a tier II financial institution, due to severe financial instability. This marks the second closure of a financial institution by the regulator in 2024, following the shutdown of EFC Uganda Limited, a microfinance company, in January for similar reasons.

Effective June 18,2024, Mercantile Credit Bank, located on Old Portbell Road, has had its license revoked, and the institution has been placed under liquidation. Deputy Governor Michael Atingi-Ego announced the closure, citing the bank’s significant undercapitalization, poor corporate governance, and insolvency as primary reasons.

“The continuation of Mercantile Credit Bank Limited’s activities is detrimental to the interests of its depositors,” stated Atingi-Ego. “The Bank of Uganda has determined that the closure of Mercantile Credit Bank Limited is necessary to protect the interests of its depositors and maintain the stability of the financial system.”

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“To ensure a smooth resolution and safeguard stakeholder interests, BOU will collaborate with the Deposit Protection Fund of Uganda (DPF) to inform depositors about accessing their insured deposits. “The uninsured portion of the deposits will be handled in accordance with Section 105 of the Financial Institutions Act 2004, as amended,” Atingi-Ego added.

All creditors are required to submit their claims to the Office of the Director, Financial Stability, Bank of Uganda, within 30 days. Borrowers should continue servicing their loans by making payments at Bank of Uganda offices and branches as advised.

This closure underscores BOU’s commitment to enforcing prudential regulations and maintaining financial system stability. “We urge all stakeholders to cooperate with us during this process,” Atingi-Ego appealed.

Mercantile Credit Bank was registered as a merchant bank in 1981 and began operations in 1986. Following the enactment of the Financial Institutions Act of 2004, MCB was categorized as a Tier II institution, authorized to offer savings and fixed deposit accounts, credit facilities, fund transfers, and foreign exchange trading.

As of December 2011, the bank’s total assets exceeded $6.6 million (UGX 16.5 billion), with shareholders’ equity around $1.6 million (UGX 4 billion). By December 2012, total assets were estimated at $9.9 million (UGX 25 billion) due to operational growth.

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