The contracts of the governor of Bank of Uganda Tumusiime Mutebile and his deputy, Dr Louis Kasekende should not be renewed, the report of the Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) has recommended.
The report, tabled yesterday in Parliament by Abdu Katuntu, the chair, accused the top management of the central bank of mismanaging the sale of seven commercial banks, including that of Crane Bank.
Other officials that COSASE wants to be held culpable are Benedict Ssekabira, the director of Financial Markets Development Coordination (FMDC), Justine Bagyenda, the former executive director for Commercial Banks supervision; and Margaret Kasule, the legal counsel.
The report, signed by 27 of the 35 MPs on the committee, noted that the Bank of Uganda board needs to be strengthened in the way it plays its supervisory role.
“The board did not adequately supervise management in the process of liquidating the financial institutions,” reads part of the report, adding:
“Good corporate governance principles would require that the position of chairperson and vice chairperson of the board is separated from the position of Chief Executive (Governor) and his Deputy.”
“It is therefore the recommendation of this committee that article 161 (4) (of the Constitution) be reviewed to separate the offices of the leadership of the board and top management of BoU,” noted the report.
‘Crane Bank was sold illegally’
Regarding the sale of Crane Bank, the MPs also found “The principles of legality therefore were highly compromised. This is exacerbated by the absence of minutes or any record detailing the process of arriving at the figures,” observed the MPs, further adding that failure to value the assets and liabilities of Crane Bank before selling it to dfcu was “imprudent”.
“The inevitable conclusion therefore is the BoU did not know the exact assets and liabilities it was disposing off. The reliance by the Central Bank on the due diligence undertaken by an interested party and eventual purchaser to purport to determine the value of assets and liabilities was imprudent and an abdication of statutory responsibility.”
The MPs also found that BoU sold Crane Bank without the authority of the board.
“The Board having resolved as above, it was ultra vires (acting without legal authority) for management to agree, conclude and indeed execute a P&A that excluded some assets and liabilities as stipulated in schedules 2 and 3 contrary to the resolutions of the Board. These exclusions disadvantaged both BoU and CBL,” observed the board.
They also faulted the BoU board for endorsing the sale that included charging interest on the Shs 200bn differed consideration at the Central Bank Rate on reducing balance basis, an act that in effect constituted a discount of Shs39 billion to the buyer but would be recoverable from the shareholders of Crane Bank.
“This in the opinion of the committee was irregular to commit the CBL shareholder for negligence on the part of the BoU officials. By their actions, the BoU officials occasioned loss to CBL and ultimately BoU. Further, by the Board’s Resolution to charge the interest on the shareholder for money ‘lent’ to DFCU, the committee finds it inconceivable that CBL shareholders who were not party to the P&A and the Shs 200 billion liability agreement between DFCU and BoU would be called upon to bear the cost of negligence on the part of BoU officials.”
“The above notwithstanding, at pages 7 and 8 of the special audit report of February 2019 on the accountability for the Shs 478 billion injected into CBL, the Auditor General observed that CBL liquidity position was significantly below compliance level for the first two months of the statutory management period. However, in the last month of statutory management, from 13th January 2017 to 24th January 2017, CBL met the required liquidity compliance levels. Therefore the bank’s liquidity position had stabilized,” observed the MPs.
The committee has also recommended that police carry out further investigations to establish the whereabouts of Shs504b BoU claimed to have injected into the banks to prevent their collapse. The report also wants properties of some of the BoU officials and others confiscated over their role in the sale of the commercial banks.
The recommendations of the report could spur changes within the central bank especially in the way it manages the economy.
MPs are expected to start debate on the report next week. It now remains to be seen whether the recommendations of COSASE will be put into action.