BOU Saga : National Bank of Commerce sale was negotiated on phone

Bagyenda responding to COSASE probe team yesterday

Parliament’s committee on commissions, statutory authorities and state enterprises (COSASE) has learnt that the defunct National Bank of Commerce (NBC) was closed and sold in one day. The committee was also shocked to hear that the bank was ‘hawked’ through phone calls to various banks before Crane Bank (now defunct) agreed to buy it.

Ben Sekabira, the Bank of Uganda (BOU) director of financial markets development co-ordination, while appearing before COSASE with the BOU team led by the governor, Emmanuel Tumusiime Mutebile, said when the central bank took a decision to close NBC, they started a process of looking for a buyer.

“The process was conducted on phone by the former executive director of supervision, Justine Bagyenda. In fact, all the other banks were shy to buy the bank. It was only Crane Bank that was strong enough to swallow it,” he said.

This prompted the committee members to quiz him on the identity of the banks that shied away, but he was quick to deny knowledge of the banks,saying it was Bagyenda who made the phone calls. He also defended the unconventional mode of doing business, saying phone calls are valid methods which have been used several times in the sale of commercial banks by the central bank.

Sekabira confessed that just as it was with the closure and sale of Global Trust Bank (GTB), the sale negotiations were never documented.The bank was closed and sold on September 27, 2012. The closure was premised on the argument that the bank had failed to resolve the conflict between the capital and shareholders that had affected the bank’s performance in addition to under capitalization.

Bagyenda told the committee that negotiations were carried out by herself, Sekabira, the BOU legal counsels Margaret Kasule and Titus Mulindwa, Kanyerezi Masembe from MMAKS Advocates, the former managing director Crane Bank and its company secretary.

The committee, which is currently inquiring into the circumstances under which several commercial banks were closed and sold by the central bank, also queried why the bank’s assets were sold at a 30% discount toCrane Bank. In response, Sekabira said it was a negotiation between BOU and Crane Bank, while Bagyenda asked for more time to verify, saying the discount was calculated from a loan listing of NBC, which list she had to look for.

The MPs also queried the whereabouts of the over sh2.5b that was credited to NBC accounts after the closure, but they were told that the money was still with BOU and could not be transferred to the bank’s recovery account because of a court injunction.

Mutebile distanced himself from the sale of NBC, saying being a shareholder in the bank, he declared a conflict of interest and delegated his deputy to handle it.

“I was one of the shareholders of the bank when I became the governor of the central bank, but throughout my time as governor I never took any decision regarding NBC. I had never declared my interests formally, until the bank had problems which required the central bank’s attention,” he said.

In response, Abdu Katuntu, the committee’s chairperson,warned that as a regulator, there should never be a point where his judgment was impaired because of personal interests.

“There should be both laws and bylaws in place to make sure that the staff of the regulator are not in any way connected with the people they are regulating,” he said.

Earlier in the hearing, the two bank officials whom Bagyenda had told the committee that participated in the negotiations during the sale of GTB, denied knowledge of such negotiations. Timothy Ssekirayi, the deputy director banking and Mackay Oumo, the director of BOU; national payment system,said though they foresaw the closure of the bank, they were never part of the sale negotiations.

This prompted Bagyenda to reveal that the transaction was between her, Sekabira, Juma Kisaame, the former dfcu Bank chief and Agnes Tibayeita, the dfcu company secretary.