BOU Tightens Grip on Ugandan Banks: New Regulations Focus on Governance, Compliance, and Risk Management

The Bank of Uganda (BOU) has introduced new regulations aimed at strengthening corporate governance, compliance, and risk management in the country’s banking sector. The move is designed to ensure that banks operate safely and soundly, protect depositors’ interests, and maintain public confidence.

New Requirements for Board Approval and Oversight

Under the new regulations, all prospective directors of Ugandan banks must obtain approval from the BOU before taking up their appointments. This requirement applies to both executive and non-executive directors. The BOU will vet proposed directors to ensure they meet certain criteria, including:

Being a fit and proper person
Above 18 years old
Of sound mind
Not an undischarged bankrupt
Not serving as a director of another bank

Code of Conduct for Directors

Banks are also required to develop a code of conduct that outlines ethical standards, risk management practices, and guidelines for dealing with customers. The code should focus on areas such as:

Anti-money laundering
Fair dealing
Conflicts of interest

All directors must sign the code upon appointment.

Remuneration Requirements

There are no specific remuneration requirements prescribed by law or the BOU, except that banks must have a compensation committee that oversees the remuneration of senior management and other key personnel. The committee’s primary function is to ensure that compensation is consistent with:

The institution’s culture
Objectives
Strategy
Control environment

AML/KYC Requirements

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

Register with the Financial Intelligence Authority (FIA)
Identify customers through due diligence measures
Implement risk assessment measures
Maintain records for at least 10 years
Report suspicious transactions
Conduct periodic anti-money laundering audits

Depositor Protection

The BOU has also introduced regulations aimed at protecting depositors’ interests. Banks are required to:

Maintain adequate liquidity and capital buffers
Ensure they can meet their obligations to depositors in the event of a crisis

These new regulations demonstrate the BOU’s commitment to ensuring that Ugandan banks operate safely, soundly, and in compliance with international best practices. By strengthening corporate governance, compliance, and risk management, the bank is better equipped to protect depositors’ interests and maintain public confidence in the banking sector.