By Andrew Mwenda

For decades, the Bank of Uganda (BOU) has been beyond scrutiny. We have always believed the central bank is managed by competent people. But the failure of Crane Bank has exposed, if not the ignorance and sheer incompetence of BOU, then its corruption.

For example, BOU spent Shs 125 billion to manage Crane Bank for the three months when they were in charge. Yet for the whole of 2015, Crane Bank’s total operational expenses were Shs 96 billion. BOU owes Ugandans an explanation for this unusual expenditure.

The reason BOU messed up Crane Bank is because it relied heavily on lawyers to advise it on problems that were largely business matters. Consequently BOU behaved like a policeman enforcing law rather than a regulator seeking to solve a business problem. The lawyers were all too happy with their hatchet job because they stood to earn billions of shillings in legal fees – regardless of what happened to Crane Bank, the financial sector and the wider economy.

BOU lawyers had serious ethical problems. The lead person advising BOU on the resolution of the problems of Crane Bank was and still is Timothy Kanyerezi Masembe, a lawyer and partner in MAAKS law firm. He is the chairman of the board of directors of NC Bank, a commercial bank that was competing in the same market as Crane Bank.

First there should be a problem with a chairman of a bank being supervised by BOU being a lawyer to BOU. Second, it is an obvious conflict of interest when the chairman of a commercial bank is lawyer of the central bank in matters concerning another commercial bank. How can he be expected not to undermine his competitor in advising BOU?

Third, Masembe had been a lawyer for Crane Bank for 20 years up to the day it was taken over. Legal ethics require that a lawyer cannot work for another client against his former client until after two years since he last served that client. BOU and Masembe ignored this.

Fourth, the same Masembe became the transaction advisor of BOU to sell Crane Bank assets to DFCU. After that his law firm was hired by DFCU to collect Crane Bank’s bad loans. While that was going on, he was BOU’s lawyer who negotiated the agreement to protect Sudir from prosecution so that he can pay BOU a ransom of $60m.

The disregard for basic ethics by BOU is blinding.