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Banks Must Comply with Stringent Regulations to Ensure Stability and Transparency

Introduction

In a bid to ensure the stability and transparency of the banking sector, the Bank of Uganda (BOU) has outlined strict regulations that banks must comply with.

Internal Auditors

According to the Financial Institutions Act, banks are required to appoint an internal auditor who:

  • Evaluates the reliability of information produced by accounting and computer systems
  • Provides an independent appraisal function
  • Evaluates the effectiveness, efficiency, and economy of operations The internal auditor must also be a member of the Institute of Certified Public Accountants of Uganda.

Code of Conduct

Banks are required to develop a code of conduct that focuses on areas such as:

  • Ethical risk
  • Honesty
  • Accountability
  • Conflicts of interest
  • Fair and honest dealing
  • Anti-discrimination
  • Gifts
  • Relationships with customers The code is meant to provide guidance to directors in complying with applicable laws, rules, and regulations.

Lending Policy

Banks are required to:

  • Approve and oversee compliance with the lending policy
  • Delegate lending limits
  • Approve credit facilities that are above the sanctioning authority of management

Compensation/Remuneration Committee

Banks must appoint a compensation/remuneration committee that provides oversight on the remuneration of senior management and other key personnel.

Approval of Directors

Before the appointment of any director or senior management member of a Ugandan bank, the approval of BOU must be obtained. The prospective director must meet the fit and proper criteria prescribed in the Third Schedule of the Financial Institutions Act, which includes:

  • Being above 18 years of age
  • Of sound mind
  • Not an undischarged bankrupt
  • Not serving as a director of any other bank

AML/KYC Requirements

The Anti-Money Laundering Act (AMLA) and the Anti-Terrorism Act criminalise money laundering and counter-terrorism financing. Banks are required to:

  • Register with the Financial Intelligence Authority (FIA)
  • Identify customers through due diligence measures
  • Maintain records on customer identification information
  • Report suspicious transactions to the FIA

Depositor Protection

The BOU has also outlined measures to protect depositors in case of bank failures. Banks must maintain a minimum capital requirement of UGX 100 billion, and depositors’ funds are protected up to UGX 10 million per depositor.

Conclusion

In conclusion, the Bank of Uganda has put in place stringent regulations to ensure the stability and transparency of the banking sector. Banks that fail to comply with these regulations may face severe consequences, including fines and even revocation of their licenses.

Contact

For more information on the regulations outlined above, please contact the Bank of Uganda at [insert contact details].