Officials of the bank of Uganda have for the second time been chased from Parliament’s Commissions, Statutory Authorities and State Enterprises (COSASE) committee for appearing without the necessary supporting documents to their submissions over the closure of the seven commercial banks in the country.
Governor Emmanuel Tumusiime Mutebile said the seven defunct banks in the Attorney General’s report were put under resolution because they were insolvent.
While carrying out bank resolutions, Bank of Uganda has identified other banks that have purchased assets of the defunct banks, Mutebile told the committee on Monday.
“The resolution of banks is a unique process and the resolution of each bank has its own unique process.”
Deputy Governor BoU Louis Kasekende explained that they had provided financial information of Teefe Bank.
“There information shows that there was communication between BoU and Ministry of Finance, BoU and the supervisors. The numbers provided show that Teefe bank was insolvent,” Kasekende noted.
Anita Among, the COSASE vice chairperson, later said the committee was justified to dismiss the BoU team for the second time.
“We know that the law gives Bank of Uganda power to open and close banks. We (COSASE) requested for the procedure used in opening and closing banks but you (BoU) did not provide it,” said Among.
COSASE chair Abdu Katuntu adjourned the meeting to Thursday at 10am saying the Bank of Uganda should be in position to provide all the necessary documents then including the Inventory report in the closure of Teefe bank in 1993.
“As we are talking about the innovatory report, let us talk about the loan schedules as well. Where are they?” Katuntu said.
He noted that on the 5th, the Governor wrote to him forwarding these files.
The Governor wrote: “reference is made by Cosase on Thursday to submit a range of documents. The bank has assembled the documents and now submits them to your office by copy of this letter. The bank must draw your attention to the following in respect to these documents. These documents contain discussions, recommendations and resolutions many of which are highly confidential to the financial industry touching on sensitive matters that can potentially have effect on other financial institutions. Disclosing such information to the public could cause substantial harm to the independence of the central bank from political and industry pressures which would compromise supervisory independence and the pursuit of financial stability. The documents submitted are as follows-35 copies of documents referred to in the bank’s matrix of responses to the Auditor General’s queries, file of minutes of board meetings that discussed the closure of banks between 1993-2017. This file is specifically for the chairperson only. We therefore request that the information from the documents submitted herein should be treated with the confidentiality consistent with the concerns raised above”.
There are two issues the Governor raises and that is confidentiality and my own interpretation of the letter is that the file he sent specifically to me contains confidential information. I am I correct, Governor?
Katuntu said he has since then not shared it with anyone.
“It’s only me who has had opportunity to go through it. Colleagues, I am going to set up a 3-man committee to study this file. I think that will protect the interests that the Governor is raising…. I see all the Board members at the time of the closure of defunct banks. However, when I look at Cooperative Bank, we had invited all the board members. I don’t know whether they are here.”
He said on page 5 of the audit report, is the availability of records on Teefe Bank, however, when you look at the matrix, there is a query: limitation on scope on Teefe Trust Bank due to failure to provide information.
“BoU cannot drop any query. The correct thing is that there were queries that were not answered. We would like you Governor to read the query and the response.”
The 7 defunct banks in the Auditor General’s report were put under resolution largely due to insolvency problems.
In conducting bank resolution, the central bank is mindful of the need for depositors to access their funds in the shortest time possible, keeping the cost of resolution low but also most importantly the need to protect the remaining part of the banking industry from any contagion effect or systemic shocks.