Kampala — The Parliamentary inquiry into the disputed closure of seven banks yesterday faulted Ministry of Finance and Bank of Uganda for relying on a wrong law to close Teefe Bank in 1993, but the central bank Governor Tumusiime Mutebile insisted he can never reopen any of the closed banks.
The Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) heard that the then minister of Finance Mayanja Nkangi (deceased) relied on the 1969 Banking Act instead of the 1993 Financial Institutions Statute to close Teefe Bank.
In a November 4th 1993 letter to the Bank of Uganda Governor, the then Finance minister directed that Teefe Bank be closed on account that its directors had failed to mobilise funds to capitalise the bank and did not have a "credible plan" on how to save the bank from collapsing.
"I strongly feel that we have given enough time to Teefe Bank directors to mobilise the necessary funds to mobilise the necessary funds to capitalise the bank as required under the new Bank of Uganda and Financial Institutions Statute. Unfortunately, they have failed to do so. We have to strengthen the financial sector and close this bank," Nkangi wrote.
Section 31 (2) of the Financial Institutions Statute 1993 stipulates: Where, as a result of its inventory under this section, the central bank determines that a financial institution is insolvent, the central bank may, in consultation with the minister, close the financial institution on account of its inability to meet its obligations to its depositors and other creditors.
"My understanding is that under that statute, the minister does not have powers to close a bank. It is Bank of Uganda and when I interpret the letter the minister wrote, BoU acted on the instructions of the minister. In the event that the minister would not have written, Teefe Bank probably would not have been closed," Mr Michael Tusiime, Mbarara Municipality MP, said.
Governor Tumusiime-Mutebile, however, told MPs that he "would never dream" of reopening any of the closed banks when asked whether the central bank would consider allowing the closed banks if it turns out that they were irregularly closed.
"In principle, I would never dream of reopening a bank as closed before," Mr Mutebile told MPs.
Mr Tumubweine Twinemanzi, the executive director for Supervision at BoU, argued that in closing Teefe Bank, the then Finance minister had acted in consultation with the central bank.
"On the 17th February 1993, the Minister of Finance acting on the advice from BoU, invoked his powers under section 33 of the 1969 Banking Act. The order from the Finance minister prohibited Teefe Trust Bank from transacting further business for a period of 30 days," Mr Tumubweine said, quoting a letter that provided a status report on Teefe Bank in 1993.
BoU officials will have to present original land titles today as evidence that the properties were not fraudulently disposed of.
The officials will today return to the committee to clear the air on the law BoU relied on to close Teefe Bank and also present original land titles of the defunct bank.