What next for banks that have not hit the Shs150bn capital requirement?

Business
What next for banks that have not hit the Shs150bn capital requirement?
The central bank in Kampala

In 2022, Finance minister Matia Kasaija signed a ministerial instrument, increasing the minimum capital requirements for banks by 6 Times or 500 percent, from Shs25 billonto Shs150 billion and it was given a deadline of June 30, 2024.

Just two months to the set deadline of June 30, 2024 , banks are still struggling to meet new minimum capital requirement , as smaller banks look at possible mergers or sell out and the moment as many as 10 banks have failed to hit the first threshold.

On March 27,  Bank of Uganda dropped Tier 1 license from three commercial banks to credit institutions, including ABC capital Bank, Opportunity bank limited, Guaranty trust bank.

These  were given a transition period of three months, starting from April 1 to June 30 during which they will make adequate arrangements to phase out products and process that required a Tier license 2.

According to Bank Uganda only five banks have fulfilled the required capital and others are still struggling to hit the capital requirement.

The Central Bank says that any bank that doesn’t hit the shs150 billion requirement  will be forced to change business direction from to a lower one.

According to Bank of Uganda higher capital requirement in banking sector is intended to enhance the financial system’s resilience to shocks, promote financial stability, and advance the capacity of the financial institution to meet the growing needs of the economy.

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