Uganda’s new minimum capital requirements for banks: Which banks are compliant and which ones are not?

In consultation with the Bank of Uganda, the Minister of Finance, Planning and Economic Development, Hon. Matia Kasaija, on 16th November 2022 signed a statutory instrument increasing minimum capital requirements for banks by  6 times or 500% from UGX25 billion (USD6.7 million)  to UGX150 billion (approx USD40.2 million).

The increment will however be tiered, starting with a minimum capital buffer of UGX120 billion (USD32.2 million) by the 31st of December 2022 and then UGX150 billion by the 30th of June 2024.

Capital requirements for non-bank institutions were also increased by 25 times or 1900% from UGX1 billion (USD268,000) to UGX25 billion (USD6.7 million) by 30th June 2024. Similarly, the increments are tiered, starting with a minimum capital buffer of at least UGX20 billion (USD5.4 million).

The buffers were increased, after a consultative process that started in August 2021. The Central Bank says the long overdue increase is “intended to match the dynamism of the economy, incentivise shareholder commitment, enable institutions to withstand shocks and to converge with regional peers among whom Uganda effectively has the lowest paid-up capital.”

Capital buffers were last revised in 2010 under Financial Institutions (Revision of  Minimum Capital Requirements Instrument), 2010. 

Nearly a week after the 31st December 2022 deadline passed, within which to meet the first tier of compliance, which is at least 80% of the total required by June 2024, we asked the Central Bank which banks have complied and which ones have not, but Tumubweinee Twinemanzi, PhD, Executive Director Supervision, Bank of Uganda was tight on the details. 

“The information on whether or not all Supervised Financial Institutions (SFIs), complied with the deadline for revised minimum capital shall be made available by the SFIs and contained in their audited financial statements that shall be published and made available to the public by the end of March 2023,” he told CEO East Africa Magazine in an e-mailed response.

CEO East Africa however reached out to several banks regarding their compliance status. Of the sampled 21 out of 25 commercial banks, 12 said they were compliant, while 5 said they were yet to comply. Four (4) others did not respond to our inquiry by press time. 

Who are the compliant banks? 

 Kenneth Agutamba, Manager, Corporate Communications at Stanbic Bank Uganda said the bank comfortably met the December 31st 2022 deadline and was also already above the June 2024 requirement.

“Yes. Stanbic Bank has already complied with the new statutory instrument. The Bank’s capital stood at UGX153.5 billion, as of December 31, 2022, well above the regulatory requirement of UGX150 billion, and ahead of the set BoU deadlines. As is our standard practice, Stanbic Bank is scrupulous in meeting all its legal and regulatory compliance requirements,” Mr. Agutamba said. 

Stanbic is Uganda’s largest bank by assets, deposits, lending, income and profitability.

Fabian Kasi, the Managing Director, Centenary Bank, Uganda’s second-largest bank, also said the bank had already surpassed the 31st December 2022 deadline and was within the June 2024 capital requirements as well.

“Our bank met the requirements as expected. Our paid-up capital by end of the year (2022) was UGX150 billion,” he told this reporter in an e-mail. 

Mbabazi K. Emejeit, Executive Director, DTB Bank Uganda, also said her bank was “so compliant”.

“In fact by 31st December 2022, we were at UGX150 billion, which is UGX30bn beyond the required.”

Michael Segwaya, the Executive Director and Chief Finance Officer, Absa Bank Uganda, also said Absa was “already meeting the deadline by the time the instrument was issued.

“Our capital levels are at UGX124 billion,” he said.

Mathias Katamba, the Chief Executive Officer, dfcu Bank also said his bank was compliant and “Share capital as of the end of December 2022 at UGX 120 billion”.

Clare G. Tumwesigye, Head of Marketing & Corporate Communications at Equity Bank also in an email to CEO East Africa Magazine said the bank was compliant and had met, the December 31st 2022 deadline.

Dorene Nyiramugisha, Head, Marketing & Communications, Housing Finance Bank, also said the bank was well capitalised, with over UGX120 billion. 

Diana Komukama Ssempebwa, Head of Marketing and Communications, KCB Bank also said her bank was compliant. 

“Our end-of-year numbers are subject to audit verification in specifics but the bank comfortably met its capital requirements as directed by the Bank of Uganda,” she said.

Other banks that said they were compliant are NCBA Uganda, Ecobank Uganda and Bank of Africa.

“NCBA is compliant with the regulatory capital requirements as of 31 December 2022. Details of the capitalisation will be published in our audited financial statements as required by the Financial Institutions Act,” Mark Muyobo, Chief Executive Officer at NCBA Uganda to this writer in an online chat.  

“Ecobank Uganda Limited currently has paid up capital of UGX 129 billion above the Central Bank’s requirement of UGX 120 billion. Ecobank has undergone a financial and business transformation to serve the market better,”  Charity Winnie Kamusiime, the Group Marketing Manager – Consumer Bank and Head of Marketing – Ecobank Uganda said in a mailed comment. 

“As the Pan African bank established across 35 states across Africa, with a total capital base of USD 2.4 billion, we are well-enabled to deliver sound banking and financial services with ease across the continent and more specifically Uganda. Our strong capital base enables us to support single-client financial intermediation of up to USD 160 million,” added Ms Kamusiime.

“Yes, we were compliant. We met the required capitalisation as of the end of December 31st 2022,” Bernard Magulu, the Executive Director, Bank of Africa confirmed to this writer.

“UBA Uganda, recently capitalised up to UGX 129 billion which is compliant with the new capital requirements/regulations,” Kenneth Kisambira, the bank’s Executive Director, told CEO East Africa Magazine, by mail.

Four banks- Standard Chartered Bank, Bank of Baroda, Citibank and I&M Bank did not respond to our inquiry by publication time. 

Who is yet to comply?

Some of the banks that, according to our survey are yet to comply are PostBank, Finance Trust Bank, Exim Bank, Cairo Bank and Opportunity Bank.  

However, Julius Kakeeto, the Managing Director, PostBank Uganda told this reporter that “PostBank Uganda already has paid-up capital of UGX112 billion and subject to shareholders’ approval, the 2022 profits will be converted into paid-up capital”.

“This will ensure compliance with the UGX120 billion requirements. PostBank and our shareholders are confident that we shall meet the full requirement of UGX 150 billion as stipulated in the law,” he said.

PostBank is 100% owned by the Government of Uganda.

Percy Lubega, the Head of Marketing & Business Development, at Finance Trust Bank was also optimistic that the bank would sooner than later be compliant. 

“We have a window within which to comply after the deadline and we are having internal shareholder engagements. We are sure we will be compliant by the end of that window,” he told this reporter on phone. 

Henry Lugemwa, Chief Executive Officer, Exim Bank also said his bank was yet to comply, but “arrangements were being made to be compliant, within the 6 months window provided to address any gaps”. 

Our survey did not cover Bank of India, Tropical Bank, Guaranty Trust Bank and ABC Capital Bank, so we are not able to tell if they complied or not.

Dangers of non-compliance 

Asked about the regulatory sanctions available to those that had not complied, Tumubweinee Twinemanzi, said: “Regarding the actions or steps that the Bank of Uganda can take to address any non-compliance thereof, please refer to Section 86 (2) (b) of the FIA 2004 (as amended in 2016) which describes the possible remedial actions.”

According to the FIA 2004 (as amended in 2016), when a financial institution is undercapitalised, the Central Bank, can among others, prohibit the financial institution from declaring and distributing any dividends which are, in the opinion of the Central Bank, likely to cause the financial institution not to comply with the capital requirements.

The Central Bank may also order the financial institution to submit to the Central Bank within forty-five days after the making of the order, a capital restoration plan to restore the financial institution to capital adequacy, within one hundred and eighty days. 

During this time, the Central Bank may also undertake more frequent inspections of that financial institution.