Bank Probe Report Pins Down Owners

By Hamis Kaheru THE judicial commission of inquiry into the closure of commercial banks has blamed the collapse of the International Credit Bank (ICB), Greenland Bank Ltd (GBL) and Co-operative Bank on their owners and managers. "The primary responsibility for the failures of ICB, GBL and Co-operative Bank lay with the owners and managers," the commission said in a report. The commission was named by finance minister Gerald Sendaula on October 26, 1999 and comprised Justices James Ogoola (chairman), David Porter and Japheth Katto. It submitted its report to the minister on November 7, 2000. Sendaula yesterday handed over a copy of the report to Speaker of Parliament Francis Ayume. The report said, "All of them (three failed banks) were afflicted with the one-man management syndrome of autocratic corporate governance - exemplified by Thomas Katto (ICB), Sulaiman Kiggundu (GBL) and USAID (Coop Bank)." It said there was no separation between senior management and the board of directors in ICB or GBL, and that management took little account of depositors' interests. "The Board of ICB consisted of four members of the Katto family, including a six year-old child. GBL had two boards of directors but neither had a say in the running of the bank, run by the managing director alone through a tiny coterie of inner-circle of sycophants," the report said. It criticised ICB's decision to guarantee the purchase of the controversial military helicopters from Belarus at US$16m, saying the cost was equivalent to 1,600% of its core capital then. It criticised Kiggundu for keeping the so-called "off balance sheet" items worth sh3.7b secret until his ouster in 1998. It said ICB and GBL resorted to dubious accounting gimmicks to inflate the value of their capital. It said ICB included as capital property it did not own to enable it comply with the required minimum capital. It said GBL misled Bank of Uganda (BOU) by including as capital proceeds from sale of its property to a shareholder. This inflated the bank's capital from sh1.1b to sh3.6b - which made BOU permit GBL to open a branch in Tanzania on wrong premises. It said ICB and Greenland lent to insiders 50% of all deposits. It called for investigation and prosecution of the perpetrators. The report said weak supervision by BOU was a secondary cause for the banks' failure. Ends