Supreme Court upholds closure of National Bank of Commerce, dismissing Nzeyi appeal
This file photo shows a building of the defunct National Bank of Commerce. Left is businessman Humphrey Nzeyi, former director and shareholder of the bank. PHOTO/COURTESY
What you need to know:
- Ugandan businessman loses final appeal over bank shutdown
- Court rules Bank of Uganda acted lawfully in NBC closure.
Uganda’s Supreme Court has dismissed an appeal by businessman Humphrey Nzeyi challenging the closure of the National Bank of Commerce (NBC), upholding the central bank’s 2012 decision to shut down the institution over financial instability.
The unanimous ruling by seven justices found that the Bank of Uganda (BoU) acted within the law when it revoked NBC’s license, placed the bank under liquidation, and transferred its assets to Crane Bank.
Nzeyi, a former director and shareholder, had argued that the move was unconstitutional and violated NBC’s right to a fair hearing. He based his appeal on nine grounds, including claims that key sections of the Financial Institutions Act (FIA), 2004 granted BoU unchecked powers.
But the court disagreed, concluding that the central bank had given NBC ample opportunity to respond to its concerns between 2009 and 2012.
“NBC was continuously and at all material times afforded a right to be heard by BoU for a period of three years,” said Justice Percy Night Tuhaise, who delivered the lead judgment.
The bench included Justices Lillian Tibatemwa Ekirikubinza, Mike Chibita, Elizabeth Musoke, Christopher Madrama, Catherine Bamugemereire and Monica Mugenyi.
The judges said BoU held multiple supervisory meetings with NBC and issued directives aimed at addressing the bank’s undercapitalization and internal shareholder disputes.
“The meetings and correspondence concerned NBC’s inadequate capitalization and how it could be re-capitalized to meet required standards,” Tuhaise noted on Friday.
At the time of its closure, NBC’s core capital stood at Shs3.48 billion, below the statutory minimum of Shs4 billion. The court ruled that any remedy would have risked depositors’ funds by returning them to an unlicensed entity.
“No remedy would restore the revoked banking license but would merely return depositors’ funds to an unlicensed entity, thus posing the risk of loss,” the court held, adding that deposits made up 92 percent of NBC’s weighted assets.
Nzeyi also claimed BoU violated privacy by sharing NBC’s confidential data with Crane Bank. The court rejected this, ruling that public interest outweighed any right to confidentiality.
“NBC, as a licensed and regulated financial institution, could not claim absolute privacy,” the justices said.
They added: “Protection of the rights and interests of the public exceed the privacy of NBC.”
The court dismissed arguments that certain FIA provisions, such as Section 101, which bars courts from staying liquidation proceedings, unconstitutionally limited judicial oversight.
“The language of the section does not oust court jurisdiction,” Justice Tuhaise ruled. “It merely prohibits a stay of proceedings except by the central bank.”
Lawyers representing BoU welcomed the ruling. “This decision reaffirms the regulatory authority’s mandate to protect depositors and ensure the health of the financial system,” said counsel Ernest Sembatya Kagwa.
Geoffrey Madette, representing the Attorney General, said the court had correctly weighed legal interpretation against economic urgency.
“The Constitution must be interpreted in light of economic realities and the urgency required in banking supervision,” he said.
With the appeal dismissed and no costs awarded, the verdict marks the end of a long-running legal dispute over NBC’s collapse and reinforces judicial support for proactive financial regulation in Uganda.
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