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Ham, DTB ruling puts Shs5.7 trillion loans at risk – UBA

Uganda Bankers Association (UBA) has described the Ham Enterprises versus Diamond Trust Bank (DTB) ruling as a “reckless judgment” that puts a portfolio of Shs5.7 trillion ($1.53b) held in syndicated loans at stake.  

In a strongly-worded statement signed by Mr Mathias Katamba, the UBA chairman, and Mr Wilbrod Humphreys Owor, the UBA executive director, bankers rallied stakeholders among them, Uganda Insurers Association, Private Sector Foundation Uganda, Uganda Manufacturers’ Association, Kampala City Traders Association, Uganda Law Society and Members of Parliament “to join us in addressing the implications of this reckless judgment” to avoid the adverse effects it could have on the country.  

Others rallied included, Civil Society, Uganda Investment Authority, Capital Markets Authority, Financial Intelligence Authority, Uganda Revenue Authority, professional bodies, and the Judiciary, which, through the Commercial Division of the Commercial Court had ruled in a case that UBA said had “sent shockwaves across the entire industry and related stakeholders”.

“As a result of the judgment, the syndicated portfolio currently at risk seated with commercial banks is over Shs5.7 trillion ($1.53b),” the statement said, noting that the ruling had also put at stake oil-related loans, some of which, it claimed had been “halted since the judgment came out. 

In March, Ham owned by Mr Hamis Kiggunddu, a Kampala businessman, sued DTB Uganda and DTB Kenya through Muwema Advocates and Solicitors, accusing them of money laundering and siphoning his accounts. 

Ham had challenged the legality of a $4.5m loan that had been drawn from DTB Kenya and advanced to the company in an application in which it had applied for an $8.3m credit facility.

In documents filed before the Commercial Division of the High Court, DTB Uganda had indicated it had sought more financing from DTB Kenya, its parent company, because it was not in a position to mobilise the entire request.

DBT also indicated Ham was aware of all proceedings but had turned hostile after defaulting on repayment, which the bank had indicated carried wider implications, among which included selling mortgaged properties located on Makerere Hill, Kampala, and Kawuku in Wakiso District, among others to recover its money.  

In his ruling on Wednesday, Justice Henry Peter Adonyo ruled that DTB Uganda had provided an illegal cover for DBT Kenya to conduct money laundering by providing financial services in a jurisdiction it was not registered.
 
However, UBA said the entire banking industry, among them 31 financial institutions, had come together to support DBT to appeal the ruling, warning that the judgment had not only put syndicated loans at risk but had created a difficult environment for Uganda’s banking sector external partners. 

It indicated the “sweeping nature of the judgment had sent to our international partner agencies and lenders shockwaves” as well as creating a good environment for borrowers with foul intentions who would anchor their default on the judgment. 

UBA resolutions   
1. Join DTB Uganda in its appeal to determine the case on its merits.
2. Join DTB Uganda to file for a stay of execution of orders of  Justice Henry Peter Adonyo.
3. Call upon the Central Bank to pronounce itself on the matter.
4. Call upon the Executive Arm of government through the
Minister for Finance and  Attorney General to pronounce itself on the matter, more so because they are the accountable officers for syndicated facilities contracted by the government including where foreign parties are involved and
5. Call upon our esteemed good borrowers and all customers to remain calm as appropriate action is undertaken to address the challenges arising from
the judgment. 

Related:

Tycoon Ham Wins Landmark 120bn case Against DTB Bank

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