Former shareholders of the defunct National Bank of Commerce (NBC) are demanding for Shs 295 billion as compensation from Bank of Uganda (BoU) over the closure of their bank in 2012.
The shareholders include former prime minister Amama Mbabazi, businessman Amos Nzeyi, former Supreme court judge George Wilson Kanyeihamba, Mathew Rukikaire, among others.
The shareholders made the request while appearing before parliamentary committee on Commissions, Statutory Authorities and State Enterprises (Cosase) today.
The committee chaired by Bugweri County MP Abdu Katuntu is investigating circumstances under which seven commercial banks were closed and sold by Bank of Uganda. The affected banks were closed between 1993 and 2016.
They include Teefe Trust bank, International Credit bank ltd, Greenland bank, Uganda Cooperative bank, National Bank of Commerce, Global Trust bank and Crane bank.
NBC shareholders told the committee that they have suffered damage and consequential loss computed at Shs 295 billion as of December 2018.
Rukikaire, the former NBC chairman board of directors accused BoU of summarily, arbitrarily and illegally closing their Bank in September 2012. Rukikaire said that they unfairly lost business and millions of dollars of their investment in the bank.
"The manner in which it was closed was in total violation of the law. It was neither transparent nor fair. It didn’t comply with the principles of corporate law and good governance. In the public notice issued by Dr Louis Kasekende, the deputy governor of Bank of Uganda, it was claimed that the takeover, winding up and the immediate sale of NBC to Crane bank was done to protect interests of depositors and maintain the stability of the financial sector. This was far from the truth. NBC depositors interests were not under any threat at the time of the closure of the bank."Rukikaire submitted.
Rukikaire disagreed with the reasoning that NBC had not met the minimum capital requirement of Shs 10 billion. He said that NBC had duly complied with a requirement to raise Shs 7 billion within four days and held an annual general meeting in which a new board of directors were elected and approved by BOU.
But, he added, ven when the Shs 7 billion was raised, Justine Bagyenda, then BoU director supervision directed that the money be invested in treasury bills and restrained the NBC board and management from using the funds for banking business.
"This frustrated the new board's efforts to effectively utilize the new capital to generate income for NBC. As a result, BoU continued claiming that the capital of the bank was being eroded yet this was caused by BoU itself," said Rukikaire.
He added that the situation was made worse when NBC was unfairly slapped with illegal civil penalties of Shs 2 million per day by Bagyenda for purported non-compliance with BoU directives.
"It is therefore very clear to us that senior staff of Bank of Uganda were determined to fail NBC and completely kick it out business." said Rukikaire.
Rukikaire insisted that at the time of closure and sale of NBC to Crane bank, NBC was not significantly under-capitalized below the minimum capital threshold of Shs 10 billion.
He further argued that if the bank's capital was impaired by any loses which BoU claimed to be Shs 300 million; it was a direct result of the civil penalties which BoU imposed and the directive to NBC not to conduct any banking business. The shareholders say that this small shortfall on the bank's capital did not warrant summary closure and sale of their bank assets.
They also told Cosase that secretly negotiating the sale of NBC assets to Crane bank in advance whilst NBC was still in business was an improper exercise of BoU's mandate under the Financial Institutions Act, 2004.
Rukikaire also accuses BoU of further violating the law by failing to appoint an auditor to make an inventory of the assets and liabilities of NBC after the takeover as required by the Financial Institutions Act.
Formerly licensed by BoU as Kigezi Bank of Commerce to carry out banking business in 1994, the bank's shareholding initially comprised more than 280 Ugandans that pooled resources together to participate in the liberalized banking sector.
The bank employed more than 300 Ugandans directly and indirectly and between 2000 and 2001, contributed Shs 10 billion in taxes according to Rukikaire.
In December 2018, the committee learnt from BoU officials that the process for the sale of the NBC in 2012 was finalized on phone.
Benedict Sekabira, the director financial markets development coordination at BoU, told Cosase then that NBC was facing a shortage of capital and battling a shareholder dispute which made it a financial risk.
He said that the potential buyer of the bank was identified through phone calls between Bagyenda, legal counsel Margaret Kaggwa, lawyers from MAKKs Advocates and former Crane bank managing director A. R. Kalani.