December 12, 2018—President Yoweri Museveni has expressed his concern over the public grilling of Bank of Uganda top officials by a parliamentary committee in a bid to investigate the liquidation and disposal of seven banks in the past.
In September, the Auditor General issued a comprehensive report highlighting widespread discrepancies in the criteria and methodology used by BoU to close the banks between 1993 and 2016.
Early this week, Museveni said although he was not against the current scrutiny of how BoU handled the distressed banks, the approach being used to get at the facts put the integrity of the central bank at risk.
“The procedure is wrong. The method of investigation should be confidentially handled,” he told the media on Monday.
Other sources told 256BN these are welcome comments in light of the crucial position the BoU holds as the guardian of financial stability and its main job of maintaining monetary policy. They said there is no benefit in making the institution a laughing stock. Airing its dirty linen in public is hurting the BoU’s reputation. Before being rebuffed not long ago, finance minister Matia Kasaija, had suggested a suspension of the inquiry.
A finance ministry technocrat told 256BN, “This process is cheapening Bank of Uganda before the public, because we are now second guessing BoU decisions. This can pose legal complications. One should not muzzle the truth, but discretion is also needed in such sensitive matters.
“There are many aspects of the central bank’s operations that have no business being made public as part of its core mandate. Just like confidentially is very important between commercial banks and their customers, it is the same with the BoU and its clients, including the government and commercial banks,” he said.
Museveni’s comments also back up the cautionary words by BoU Governor, Prof. Emmanuel Tumusiime Mutebile made last month before the Committee on Commissions Statutory Authorities and State Enterprises.
He said, “I would like to re-emphasize to this Committee and the public that the principal objective of financial regulation is to maintain stability and soundness of the banking system. This would greatly be undermined if there is erosion of confidence in the key stakeholder,that is the depositors.”
According to the Uganda Bankers Association in the late 1990s and early 2000s, the Ugandan banking industry underwent significant restructuring. Several indigenous commercial banks were declared insolvent, taken over by the central bank and eventually sold or liquidated. These included Uganda Cooperative Bank, Greenland Bank, International Credit Bank, Teefe Bank and Gold Trust Bank, which were closed or sold.
However sharp questioning by COSASE members during recent weeks led by Chairman, Abdu Katuntu, have revealed an often divided BoU management and selective record-keeping which has done little to shore up the central bank’s prestige. Referring to Museveni’s concerns yesterday, Katuntu said they had no intentions of holding the proceedings in camera for the sake of public accountability.
Mutebile said last month, “Our appeal to the Committee is that as you engage us, be mindful of the ongoing court cases, which have implications on how much information we can divulge on the affected banks.”