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Banks Face Stricter Compliance Rules as Uganda’s Central Bank Gets Tougher on Regulations

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Kampala - New Regulations Introduced by Central Bank to Strengthen Financial Sector

In a bid to strengthen the country’s financial sector, Uganda’s Central Bank has introduced new compliance procedures for banks operating in the country. The move comes as part of efforts by the Bank of Uganda (BoU) to improve the regulatory environment and prevent money laundering and other illicit activities.

Enhanced Regulatory Environment

According to sources within the BoU, several key regulations have been updated or introduced to enhance financial stability and ensure that banks operate within the law. Some of the new guidelines include:

  • Minimum Capital Adequacy Ratio: Commercial banks will be required to maintain a minimum capital adequacy ratio of 10% as of December this year, up from the previous 8%.
  • Microfinance Institutions (MFIs): MFIs will be required to have a minimum capital base of Shs500 million by June next year.
  • Credit Classification and Foreign Exchange Transactions: New guidelines on credit classification and foreign exchange transactions will be introduced for banks to adhere to.

“The aim is to ensure that all financial institutions operate within the regulatory framework and do not engage in any activities that can compromise the stability of our financial system,” said a senior official at the BoU.

Identification of Systemically Important Banks

The Central Bank has also introduced a new framework for identifying domestic systemically important banks (DSIBs), which will help identify institutions that pose a high risk to the financial system. Other regulations include guidelines on:

  • Licensing and Operation of Forex Bureaux: New guidelines on licensing and operation of forex bureaux.
  • Money Remittance Companies: Requirements for credit referencing bureaus.

Strict Penalties for Non-Compliance

The BoU has also outlined strict penalties for non-compliance with the new regulations, including fines and even revocation of licenses. Banks and other financial institutions have until the end of this year to comply with the new regulations. Failure to do so will attract penalties and fines.

Continuous Monitoring and Enforcement

BoU has said that it will continue to monitor the implementation of the new regulations and take necessary action against any institution found non-compliant.