Uganda Bankers Association (UBA) has Thursday come out to voice their concerns over yesterday’s High Court ruling against one of its members, Diamond Trust Bank (DTB).
The High Court Commercial Division Judge, Henry Peter Adonyo ruled that DTB Kenya (DTBK) acted illegally in lending money to Ham Enterprises owned by businessman Hamis Kiggundu, through Diamond Trust Bank Uganda.
The syndicated loan facility totaled Shs 39.7bn which the businessman acquired to facilitate his businesses and defaulted on payment.
In his ruling, the judge said DTBK couldn’t lend money to Kiggundu because it had not been licenced to conduct business in Uganda.
The ruling has since sent shock waves through the banking sector in the country, in which a massive chuck of loan facilities are syndicated.
This morning, executives from the various UBA member banks held an emergency warning in which they sent out a warning on the dangers that the court ruling could pose to the sector.
Among others, the banks warn that the judgement placed at risk the entire syndicated portfolio currently seated with commercial banks, which is now about Shs 5.7 trillion (1.53 billion USD).
These loans run across various sectors including real estate, road construction, energy covering hydroelectric power, oil and gas and manufacturing among others.
“The above figure does not include pipeline transactions that were still being processed or undrawn yet that have all been halted since judgement came out yesterday,” the Bank Executives said in a statement following the meeting.
These noted further that besides the Shs 5trillion portfolio in the private sector, Government itself has also acquired an even larger sum in syndicated loans for various development programmes in the country.
The court ruling the banks said, had also sent sweeping shockwaves to their international partner agencies and lenders and could have severe implications for the country as an investment destination.
The also fear that the judgement could encourage other borrowers with foul intention who can now anchor their default on this judgement that declared syndication illegal.
The Bankers association as such, following today’s meeting, have since resolved to join Diamond Trust Bank (Uganda) Limited as an interested party in its appeal at the higher court to determine the case on its merits.
These now intend to jointly file for a stay of execution of the orders of the judge, as ruled yesterday.
The association has also called for the Central Bank of Uganda as well as the Executive Arm of Uganda Government through the Minister for Finance and the Attorney General to pronounce themselves on this matter.
“These are the accountable officers for syndicated facilities contracted by Government including where foreign counter parties are involved and re-assure the financial sector, the international lending partners and entire country of the commitment to continue honoring all debt obligations in line with agreed protocols,” they said.
The banks on the other hand called upon their borrowers and all customers to remain calm as appropriate action is undertaken to address the challenges arising from this specific judgement.