Bank of Uganda officials have revealed shocking details surrounding the closure of Teffe Bank.
Appearing before the Committee of Statutory Authorities and State Enterprises (COSASE) on Thursday to respond to queries raised in the special Auditor General’s report about the controversial closure of the seven defunct banks, Tumubweine Twinemanzi, the Executive Director -Supervision at BoU revealed that Teffe Bank was closed on the orders of then Minister of Finance, Mayanja Nkangi (RIP) despite not having legal powers to do so.
Twinemanzi further 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, 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.
“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.”
After looking at the Nkangi letter, Abdu Katuntu, the COSASE Chairperson said: “It isn’t true that Teffe was closed in February 1993, so your response isn’t accurate. Teffe was actually closed on 4th November 1993. What we see is that Minister closed the bank without the relevant authority because the letter that was ordering the closure of Teffe Bank came from his office yet he had no authority to that effect because his powers were trimmed by the coming into effect of the Financial Institutions Statute.”
Rubaga North MP, Moses Kasibante asked Mutebile whether it was the Minister or Bank of Uganda that actually put a padlock on Teffe Bank.
“Teffe was closed by Ministry of Finance but the person who put the lock is Bank of Uganda,” Mutebile said.
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, it was revealed that at the time of closure, the Minister didn’t have the powers to close the Bank as such powers were vested into the Central Bank.
BoU lead lawyer r admitted that the Minister didn’t have powers to close the Bank under the 1993 Statute.
He said Nkangi’s letter was irregularly worded, noting that Teffe could only be closed by Central Bank in consultation with the Minister.
Other banks closed controversially are International Credit Bank Limited, Greenland Bank, Co-operative Bank, National Bank of Commerce (NBC), Global Trust Bank and the most recent Crane Bank Limited. COSASE is investigating one by one, starting with one that was closed first (Teffe bank).