GTBank loses commercial status after Bank of Uganda reclassification
TLDR
- BoU downgrades GTBank and two other banks to Tier II credit institutions, restricting forex trading and current account openings.
- Affected banks can still accept deposits and maintain savings accounts, reflecting a strategic shift in operations by BoU.
- Move aimed at repositioning banks to better serve core customer base, decision made by respective boards of directors.
The Bank of Uganda (BoU), Uganda’s central bank, has downgraded Guaranty Trust Bank (GTBank) from a Tier I commercial bank to a Tier II credit institution. This reclassification also applies to two other banks, ABC Capital Bank of Kenya and Opportunity Bank.
This downgrade restricts the affected banks from opening current accounts for customers or engaging in foreign currency trading. However, they can continue to accept customer deposits and maintain savings accounts.
BoU clarified that the decision to reclassify these banks was made by their respective boards of directors, aiming to strategically reposition the institutions to better serve their core customer base. This move reflects a strategic shift in the operations of these banks, as announced by BoU in a statement released on Wednesday.
Key Takeaways
In 2023, Uganda’s finance ministry introduced regulations stipulating that commercial banks operating within the country must maintain a capital buffer of at least $38.6 million, a significant increase from the previous requirement of $6.4 million. Recognizing their inability to meet the revised deadline of June 30, 2024, GTBank, ABC Capital Bank, and Opportunity Bank applied to be reclassified by the central bank. The Bank of Uganda subsequently confirmed that these three lenders fulfill the capital requirements necessary for obtaining a Tier II license. This reclassification enables them to continue operating within the financial sector while adapting to the new regulatory framework set by the government.
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