Exciting news from Tanzania where FBME Bank Limited is in High Court. The plaintiff Coast Textiles Limited, alleged that they have received a report suggesting that FBME Bank Limited was in the process of winding up its business in the country. The case FBME Bank Limited vs Coast Textiles Limited is heritage from the takeover of Delphis Bank that granted FBME Bank its main banking license in Tanzania in 2002.
The High Court in Dar es Salaam has ordered the Governor of the Bank of Tanzania, Professor Benno Ndulu and Statutory Manager Lawrence Mafuru, with FBME Bank Limited to give accounts how the decree for payments of over 92bn TZS given in favour of Coast Textiles Limited should be implemented. This verdict should NOT be confused with claims against the bank after it was placed under resolution by the central bank in Tanzania.
According to the order issued by Deputy Registrar Projest Kahyoza, both Ndulu and Mafuru risk being taken to prison as civil prisoners if they will not give sufficient explanations on execution of the decree. A profound measure since Ndulu and Mafuru are only involved by their duties as Governor of the central bank in Tanzania and appointed administrator of FBME Bank Limited.
It doesn’t come as a surprise that there is rumble in the kitchen. It is for customers difficult to get in touch with FBME Bank Limited. The only response customers get is that their funds are not at risk. But is this reality, especially now corresponding banks Deutsche Bank and Commerzbank, where FBME Bank finds the majority of their funds being blocked, are under pressure? Mafuru is known in Tanzania as a political exposed person. Exactly the type of customers FBME Bank tried to remove from its client base since 2012 and that are difficult to deal with in the international banking arena.
The central bank of Cyprus filed its case in Cyprus court end of December 2015. It requested court to approve the liquidation of the Cyprus branch of the bank and the business unit in Tanzania that held offshore companies and high net worth individuals that were managed from Cyprus. The residence principle, the general fear that Tanzania customer accounts are at risk and the current position of Governor of the Bank of Tanzania and administrator of FBME Bank in Tanzania allow the CBC to file for liquidation of both the Cyprus branch as well as the before mentioned business unit in Tanzania. All factors combined encourage fast action by the courts involved.
It looks like the situation with FBME Bank Cyprus and Tanzania enters the next stage. Since the bank has no access anymore to payment services like IBAN and SWIFT, there is no rational possibility to re-open the bank and give the banks customers access to their funds. The suspension of the branch license of the bank in Cyprus on the 21st of December 2015 was the first important step in the procedure. The activation of the deposit guarantee scheme in Cyprus for account holders in Cyprus was step two. Step three is the most crucial step; getting approval to liquidate the Cyprus branch and business unit in Tanzania for the accounts managed from Cyprus, while simultaneously appoint a liquidator.