KAMPALA– A Parliamentary probe into the circumstances that led to the closure of the seven defunct Banks by the Central has established that the then Minister of Finance, Mayanja Nkangi ordered for the closure of Teffe Trust Bank despite not having legal powers to do so.
The revelation was made on Thursday during a meeting held between the officials of the Central Bank and MPs on the Committee of Statutory Authorities and State Enterprises (COSASE) that was looking into the process that led to the closure of Teffe Bank.
Director Supervision Tumubweine Twinemanzi told Parliament that Teffe Bank was closed in February 1993 under provisions of the Banking Act 1969 which didn’t contain substantive provisions on reports that the liquidator was supposed to compile.
However, it wasn’t long before Michael Tusiime, the Mbarara Municipality MP pointed out the loopholes in the information the Central Bank had provided, tabling a letter authored by Nkangi on 4th November 1993 ordering for the closure of Teffe Bank.
Tusiime asked: “I find the information the Director is giving contradicting. I don’t think Teffe Bank was closed twice. The Minister made a decision to close Teffe bank on 4th November 1993 after Teffe failing to fulfill the conditionality set by Bank of Uganda. If they are referring to the law, the Minister was referring to Banking Act 1969. I wanted clarity in as far as when Teffe Bank was closed.”
COSASE Chairperson, Abdu Katuntu also scrutunised the Nkangi letter and noted: “It isn’t true that Teffe was closed in February 1993, so your response isn’t as accurate. Teffe was actually closed on 4th November 1993.”
Katuntu adde: “What we see is that Minister closed the bank without the relevant authority because the letter that was ordering the closure of Teefe Bank came from his office yet he had no authority to that effect because his powers were trimed by the coming into effect of the Financial Institutions Statute.”
Moses Kasibante, (Rubaga North) asked Mutebile whether it was the Minister of Bank of Uganda that actually put a padlock on Teffe Bank?
Mutebile replied: “Teffe was closed by Ministry of Finance but the person who put the lock is Bank of Uganda.”
It was then that Katuntu inquired if the Minister had powers as of 4th November, 1993 to close a Bank and reading Section 34 of the Financial Institutions Statute, Tusiime pointed out that at the time of closure, the Minister didn’t have the powers to closed the Bank as such were vested into the Central Bank.
Indeed, BOU Legal Director admitted that the Minister didn’t have powers to close the Bank under the 1993 Statute, and that Teffe could only be closed by Central Bank in consultation with the Minister, saying Nkangi’s letter was irregularly worded.