BoU board failed to supervise bank liquidation process -report

Kampala, Uganda | THE INDEPENDENT | Bank of Uganda has been blamed for failing to supervise management in the process of liquidating financial institutions.

In the COSASE report to parliament tabled by the committee Chairperson Abdu Katuntu, the Central Bank Board’s failure to supervise liquidation of the defunct banks is demonstrated in the fact that to date, they have never demanded for final reports on the liquidated financial institutions.

“The committee observes it is against the spirit of Article 161 (2) of the Constitution which provides that the authority of the Bank of Uganda (BoU) shall vest in the Board,” reads part of the report.

The Central Bank Board’s powers are further stipulated under Section 10 of the BoU Act which provides for the duties of the Board as being responsible for the general management of the affairs of the bank, ensuring the functioning of the bank, implementation of its functions and formulation of policies.

“It is recommended that the Board reminds itself of its obligations and mandate under both the Constitution of Uganda and the Bank of Uganda Act. The appointing authority may in the event of any failure on the part of the Board ineffective supervision of the management consider reviewing their appointments,” further reads the report.

Dr William Kalema, one of the Central Bank Board Members while appearing before COSASE early this month revealed that they had very limited time to consult widely before the closure of commercial banks.  Kalema added that the board was not involved in the mechanics of closing the bank.

Meanwhile, COSASE has also called for the review of Article 161 (4) of the Constitution to separate the offices of the leadership of the Central Bank Board and top management.

Article 161 (4) currently provides that the Governor and Deputy Governor shall be Chairperson and Vice Chairperson of the board respectively.

However, in its report, COSASE says that good Cooperate governance principles would require that the position of Chairperson and Vice Chairperson of the Board is separated from the position of Chief Executive Officer and his Deputy.

“Separation of these two positions is generally regarded as good practice, as it can help to achieve an appropriate balance of power, increase accountability and improve the Board’s capacity for decision making independent of management,” Katuntu told parliament on Thursday.

Parliament is scheduled to debate the committee findings and recommendations on Tuesday.

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