GTBank and 2 others to transition to credit institutions in Uganda by June

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March 28, 2024
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2 min read
GTCO office
GTCO office; Image source: BusinessDay

The news: 

  • The Bank of Uganda has approved Guaranty Trust Bank's (GTBank) application to downgrade its operations from Tier I commercial bank to Tier II credit institution. 
  • The Guaranty Trust Holding Company (GTCO) Plc subsidiary bank applied in anticipation of failing to meet new capital buffer requirements for commercial banks.
  • In addition to GTBank, two other commercial banks — ABC Capital Bank and Opportunity Bank — applied. 

The BoU's Deputy Governor, Michael Atingi-Ego, signed the notice stating that the three banks will have a three-month window to transition from April 1, 2024, to June 30, 2024.

“This is intended to ensure a smooth service transition for their customers and to mitigate any disruption to financial sector stability,” Atingi explained. 

The BoU anticipates that the three lenders will make all required arrangements to phase out products and procedures that call for a Tier I Licence during this transitional period. 

In 2023, the country’s finance ministry instituted regulations mandating commercial banks operating in Uganda to have a minimum of $38.6 million as a capital buffer, an increase from the initial $6.4 million.

The three institutions requested to be downgraded because they feared they couldn’t meet the June 30, 2024, deadline.

“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,” BoU disclosed in a statement on Wednesday, March 27, 2024.

The apex bank stated that GTBank, ABC Capital Bank, and Opportunity Bank meet the capital requirements for operating a Tier II Licence, allowing for a minimum capital requirement of $6.4 million from $275,802 under the new regulations.

Following the downgrade, the three banks can only accept customer deposits and hold savings accounts; they can’t trade foreign currency or open current accounts for customers.

So far, seven other banks have yet to meet the new capital requirements. 

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Other financial institutions affected by the new minimum capital requirement directives include foreign exchange bureaus and microfinance deposit-taking institutions, which must now have $2.5 million.

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