As Cosase winds up bank probes, bits of truth and mischief linger

What you need to know:

  • Dr Kiggundu nailed. Certain key people in government and external to Uganda, who oversaw implementation of these policies were very skeptical of the idea of “Catholics” running a bank. The same people unfairly nailed the late Dr Kiggundu for being in bed with Muslim terrorists, which was hardly the case.

Chairman Abdu Katuntu (FDC Bugweri) has wound up the Cosase probe into Bank of Uganda closure of a number of commercial banks, and announced he is not a candidate for re-election in 2021.

The BoU probe challenged a number of precepts that augur well for the rule of law in Uganda principally the accountability of the Executive to Parliament who are the people’s elected representatives. It highlighted certain managerial issues that have confounded the Central Bank and require urgent action in the calibre and choice of personnel to run this important institution.

The probe probably also finally sealed the fate of the closed banks. No single bank was able to show it had the required liquidity to meet BoU’s regulatory requirements. Already the economy is breathing better after the closure of Crane Bank where many rather large bank loans resided at the time of its closure.

The Cosase probe shone an unwelcome light into the Central Bank. First, is imprudence on the delays in bringing illiquid banks to order creating systemic risks in the economy? The integrity of an economy lies in the ability of businesses and individuals to freely transact and meet their obligations within the financial ecosystem.

Second is a lesser evil of failing to resolve the banks, sale of residual assets, which was tainted with a number of irregularities that may have impaired whatever little of shareholder equity was left. This was followed by specific acts of misconduct by owners of certain banks conducting a number of activities prohibited by the law, namely unregulated insider lending, rogue banking practices, a mix of bank and personal assets and the almost treasonable practice of publishing falsified accounts. That these happened under the nose of BoU and the calibre of managers it is supposed to have in its wings is shameful and BoU has to retreat at Kampala Road and re-strategise. Heads must roll.

Certain critical information seems to have been lost in the Cosase probe, a function of lack of capacity at Parliament. The policy side especially. BoU has government for a client. Some actions were directives taken at the highest levels of government and Cosase missed a major chance to question the President, who has been central in taking executive decisions under Article 99 of the Constitution.

For example, the collapse of Greenland Bank was linked to its illegal acquisition via Westmont Holdings of the former UCB. The magistrate who heard the criminal case brought by the Suleiman Kiggundu faction, is now a high profile appellate Justice and that court case died a natural death. The licensing and operation of Global Trust Bank and allowing it to run for years without making a profit as it passed off as a branch of a foreign bank was a risky practice that could have exposed the Ugandan financial system to global sanctions for failure to adequately regulate its financial sector.

The story of Bank of Kigezi, later NBC and its unending shareholder disputes, including the failure to deliver a share certificate to an Abu Dhabi entity, who invested in $10 million is another failure. Some banks like Cooperative Bank simply lacked personnel to manage a complex business of a bank. Government bankrupt in its early years was also a major culprit stealing from banks and the general economy through unpaid bills, political chits and assets as costly as the lifestyle of chairman Frank Mwine.

It is a miracle of sorts that banks like Centenary Bank survived this Armageddon. Certain key people in government and external to Uganda, who oversaw implementation of these policies were very skeptical of the idea of “Catholics” running a bank.
The same people unfairly nailed the late Dr Kiggundu for being in bed with Muslim terrorists, which was hardly the case. Greenland Bank fell apart due to the stubbornness of the late, and a misplaced ego to become the largest bank. This saga should not turn into a charade. People in Luweero buried their dead and moved on, we should all move on.

Mr Ssemogerere is an Attorney-at-Law
and an Advocate. [email protected]