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Mutebile says Uganda needs well managed local banks

By John Odyek

Added 28th March 2019 08:43 PM

He said that contrary to the negative coverage about the central bank during the Parliamentary probe into closed banks recently none of the failed banks in question came to its end because of the failure of supervision by the central bank.

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Bank of Uganda Governor, Emmanuel Mutebile (File photo)

He said that contrary to the negative coverage about the central bank during the Parliamentary probe into closed banks recently none of the failed banks in question came to its end because of the failure of supervision by the central bank.

Bank of Uganda Governor, Emmanuel Mutebile has said Uganda needs locally owned commercial banks that are well managed.

Mutebile while addressing the public in a town hall meeting in Fort Portal informed the public that it was not the poor supervision by the Central Bank  that led to the closure of seven commercial banks.

The governor did not explain whether the closure of the banks would lead to the birth of others that are well managed.

He did not also explain whether if the ailing banks were given proper treatment or transferred to the shareholders of the country would not have nurtured the growth of local banks as is the history of the growth of banks world over.

“Do we want more local banks? Yes, we do. Do we need more local banks? Yes, we do. Can we have more local banks? Yes, we can. But first, we must realise, admit and correct the mistakes that have led to the demise of the local banks that failed the test of time,” Mutebile said on Thursday.

Mutebile was discussing what Bank of Uganda (BOU) does to promote the economic wellbeing of the citizens of Uganda he was accompanied by the board of directors, management and staff.

The meeting was attended by Alex Ruhunda, the Member of Parliament for Fort Portal Municipality, Owekitinisa James Kaija, representing the Prime Minister of the Kingdom of Toro, religious leaders and district officials and local leaders.

He noted that the most prominent news from the financial sector recently has been about the investigations by Parliament into the manner in which the central bank handled some banks that failed in the past.

“The failure of locally owned banks is a problem that should keep many people awake at night until Ugandans master the professional skills, knowledge, and attitudes that are required by the banking industry so as to unlock the power of finance in making our communities prosperous”.

He said that contrary to the negative coverage about the central bank during the Parliamentary probe into closed banks recently none of the failed banks in question came to its end because of the failure of supervision by the central bank.

He explained that the problems the closed banks faced were; bad loans that were not fully serviced or that went unpaid entirely resulting in losses; insider loans to directors and related companies; mismanagement; misreporting; liability-asset mismatches; and under-capitalization among others.

He said that politicians at the highest levels intervened in the closure of these banks causing BOU to hold back. He admitted that sometimes politicians interfered in the supervision processes by Bank of Uganda given that at that time Uganda was still at the infancy of its politics.

“It does not please me to say that Uganda has had too many cases of banks that have not always acted in the best interests of their shareholders and customers; often imposing financial costs to the taxpayers as the Government took measures to protect innocent citizens of failed banks,” he said.

He said BOU has experienced a major problem where the interest rates charged by financial institutions remain stubbornly high. “There remains room to work on reducing the high interest rates that are prevailing,” he said.

He expressed concern about people rejecting coins of lower denominations especially sh50 which he said should not be the case. He also asked commercial banks to provide change to the public to ease financial transactions. He urged bankers to remove long queues in banks because they waste the time of customers.

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