“Whatever we did was in accordance with the law” Kasekende speaks out on COSASE report

Kasekende appearing before committee recently

The central bank has roundly rejected the findings of the parliamentary committee on commissions, statutory authorities and state enterprises (COSASE) that there were irregularities in the way it handled the closure of seven commercial banks.

Last week, the COSASE chairperson, Abdu Katuntu, presented the report on the findings of a three-month probe, indicting Bank of Uganda (BOU) for flaws in the way they liquidated and sold insolvent banks.

However, the deputy governor of BOU, Dr Louis Kasekende, insists that they followed the law.

“The report has some good recommendations and there are others that need reflection but for now, we shall study the report, especially issues that relate to interpretation of the law. In our assessment, we followed the law, although the report says we didn’t. Whatever we did was in accordance with the law and we shall study it with our legal team and come up with a final decision,” Kasekende said yesterday.

Parliament has been investigating how the central bank closed Teefe Trust Bank Ltd (1993), International Credit Bank Ltd (1998), Greenland Bank (1999), the Co-operative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) and Crane Bank in 2016 based on a special audit report by the Auditor General, John Muwanga.

In the report, the lawmakers noted that in several cases, the central bank did not follow the Financial Institutions Act (FIA) and BOU regulations and as such, recommended that in consultation with the finance ministry, they should set new regulations for handling insolvent banks.

However, the BOU executive director for research, Dr Adam Mugume, argued that although the central bank made mistakes such as having lawyers that are also board of directors of commercial banks, the core of the investigation should have been whether the closed banks were properly managed.

“The objectives of the enquiry focus on the second part but the crux of the matter is that the first part of this discussion is whether the closed banks were poorly managed or mismanaged. This is the source of the problem even before you look into liquidity injection or asset collection otherwise you may lose the point,” Mugume said during a local radio talk show over the weekend.

The first objective of the enquiry was to establish whether proper inventory of the assets and liabilities of the banks was undertaken at the closure in line with Section 89 (3) of the FIA, 2004 and to investigate if the liquidator appropriately managed the sale of assets and accounted for the funds resulting from the sale.

Except for the International Credit Bank and Teefe Trust Bank, the report says the central bank was able to avail inventory reports in respect to the other five banks that were closed. Besides the law, the report also recommended that all BOU officials who failed to properly execute their duties in accordance with the law should be held responsible for their commissions and omissions but the report avoided naming particular BOU officials for sanctions.

Katuntu explained that the committee took a decision to avoid going against individuals because the process was meant to lead to policy reforms, improvement of governance at the institution in question and accountability, which it achieved yet there are other state agencies such as the Police that can further investigate and hold individuals culpable.

Although the report faults BOU for failing to involve the statutory manager in the sale of Crane Bank, its biggest shareholder, Sudhir Ruparelia, could not be reached for a comment while his son and business associate Rajiv Ruparelia said:

“I am not in position to comment on the report and I have not yet received it.”

The report says Crane Bank had recovered from liquidity distress at the time it was dissolved while the winding up of the National Bank of Commerce was found to be irregular because it was concluded in six hours without issuing a winding up order and publication.

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Lukwago Joseph grew up in a newspaper family, and rumor has it that instead of playing the guitar in his infancy, his parents put a reporter’s notebook and a pen next to him shortly after he turned born eight years. Before becoming editor of UGANDANZ, Lukwago was a parliament news editor for WBS TV. He joined UGANDANZ in July 2018, A few months after the company launched. Lukwago also spent five years as a freelance reporter, where he covered reporting for the highest bidder, intelligence, foreign policy, and Ugandan police. Lukwago graduated from Makerere University in 2008 with a B.A. in Journalism and worked on his college newspaper.