Six years since the National Bank of Commerce (NBC) was closed, the stakeholders and directors believe the Central Bank acted outside the law and illegally closed it.
The bank’s chairman board of directors, Mathew Rukikaire, accompanied by other stakeholders and directors told the parliamentary committee on commissions, state authorities and state enterprises (COSASE) yesterday that although the Bank had the capacity to raise the sh300m capital, the Central Bank with ill motives, summarily, arbitrarily and illegally closed it without consultation.
“The manner in which it was closed was in total violation of the law. It was neither transparent nor fair. It did not comply with the sound principles of corporate law and good governance,” Rukikaire told the Committee.
He argued that whereas the Central Bank argued that the bank was closed to protect the interests of the depositors and maintain the stability of the financial sector, the depositors’ interests were not under any threat and at the time of closure, there was no threatened run on the bank. Rukikaire informed the MPs that the bank was closed at a time when the shareholders had just raised and invested sh7b which the Central Bank had asked them to raise within seven days.
“Instead, we raised the money in four days. But when the then Bank of Uganda (BOU) executive director bank supervision Justine Bagyenda discovered that we had managed to raise the money, she directed that the capital be invested in Treasury Bills and restrained the board and management from using these funds for banking business. The Central Bank continued claiming that the capital of the bank was being eroded yet this was caused by BOU itself,” he said.
Rukikaire said the problem was worsened when the Central Bank unfairly slapped with illegal civil penalties of sh2m per day for allegedly none compliance.
“It is, therefore, very clear to us that senior staff of BOU were determined to fail NBC and completely kick it out of business. To our surprise BOU three months after we had injected sh7b, they moved in and took over the bank ignoring all the right procedures,” he said.
As a result he said NBC has suffered loss, damage and consequential loss amounting to sh295b as of December 2018. When MPs asked the officials to explain why they think there was ill motive behind the closure and why one of the directors’ Amama Mbabazi did not intervene, Rukikaire bounced the matter to Mbabazi.
“You were considered the most powerful man in government at the time. You were alpha and omega. Why didn’t you intervene and stop Bagyenda from closing it. Who was more powerful, Bagyenda or you?” MP Peter Panadol Mugema (Iganga Municipality).
Mbabazi informed the committee that after the closure, the shareholders challenged the process, but up to now court has not yet fixed the date for hearing. On why he did not intervene, Mbabazi said:
“The difference between us was that my actions were in accordance with the law while Bagyenda acted outside the law. As a law abiding citizen, I had to follow the law to the letter,” he said.
Amos Nzei, one of the directors narrated the ordeal he has gone through since the closure and how Bagyenda was unhappy when the NBC managed to get sh7b required by Central Bank.
“I borrowed the money from a Kenyan friend and raised some from the shareholders. Today, I am required to pay sh168m per month to pay back the loan which has really crippled my life. When Bagyenda discovered that we had raised the money in the shortest time possible, she was so angry and demanded to know where I had gotten the money,” he said.
He told the committee that by the time of closure Emmauel Mutebile, the current BOU governor had ceased being a shareholder and had sold his shares to him.