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Bank of Uganda downgrades GT, ABC, Opportunity banks to Tier II

Opportunity Bank is among the banks that have been downgraded

Opportunity Bank is among the banks that have been downgraded

Bank of Uganda (BoU) has refuted claims that its tough regulatory requirements are forcing financial institutions to downgrade or completely out of business.

This comes as the regulator, BoU notified the public that three commercial banks (Tier I) had been downgraded to Tier II credit institutions after their applications were approved. 

The banks are Guaranty Trust Bank (GT Bank), a subsidiary of Guaranty Trust Group of Nigeria, which launched in Uganda after taking over Kenya’s Fina Bank in 2008, ABC Capital Bank which evolved from a microfinance institution Capital Finance Corporation Limited before being acquired by Kenya’s ABC Bank in 2008, as well as Opportunity bank. 

Opportunity bank is a descendant of Faulu Uganda, an NGO that started in 1995 before evolving into a micro-lender and being acquired over time by Opportunity International, a lender to poor communities, and fully branded to Opportunity Bank Uganda Ltd in 2011. 

Having degraded, now the three banks are only allowed to accept customer deposits and hold savings accounts, but not opening current accounts for customers, issuing cheques, or trading in foreign currency. 

The three banks have now been given three months starting April 1 to complete the transition process by July 1, 2024, during which time “they will make adequate arrangements to phase out products and processes that require a Tier I License,” says Michael Atingi-Ego, deputy governor, in the statement.

This, he says, is aimed at ensuring a smooth service transition for their customers and to mitigate any disruptions to financial sector stability. Bank of Uganda says in the statement that the banks' owners are laying new business strategies regarding their business targets. 

“The change of the status of the three commercial banks to credit institutions follows decisions by the respective boards of directors, to adopt a strategic shift and reposition these institutions to serve their core customer base better,” he said. 

He insisted that the institutions were adequately capitalized, meeting the capital requirements for a Tier II License.  According to the capital requirements issued by the ministry of Finance, Planning and Economic Development last year, commercial banks are supposed to have a minimum capital of Shs 150 billion by June 2024, raising it from Shs 25 billion in 2022. 

By September 2023, according to the International Monetary Fund (IMF), only 18 out of the 25 commercial banks had met the minimum paid-up capital requirements, while others were still looking for the sources. 

Some of the seven commercial banks had applied to be downgraded to Tier II, where the minimum capital requirement is Shs 25 billion, which was raised from Shs 10 billion under the same ministerial instrument. 

Tumubweine Twinemanzi, executive director of supervision at the Central Bank, dismissed the claims that it was these requirements that were driving institutions into downgrading. 


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