1. Legislative Framework

 1.1 Key Laws and Regulations

The primary legislation regulating the banking sector in Uganda is the Financial Institutions Act, as amended. The Financial Institutions Act was enacted in 2004 to provide for the regulation, licensing, capital and operating requirements, control and discipline of banks and other financial institutions in Uganda.

The Financial Institutions Act establishes the requirement for persons carrying out “financial institution business” to have a valid licence granted under the Act. The term “financial institution business” is used to mean the activities carried out in the banking sector in Uganda.

Financial institution business in Uganda as defined under the Financial Institutions Act includes acceptance of deposits, issue of deposit substitutes, lending or extending money held on deposit or any part of it, engaging in foreign exchange business, issuing and administering means of payment including credit cards, travellers’ cheques and banker’s drafts, providing money transmission services, trading in money market instruments, debt securities and futures, options and other derivatives relating to debt securities, safe custody and administration of securities, soliciting or advertising for deposits, money broking, financial leasing, merchant banking, mortgage banking, creating and administration of electronic units of payment, dealing in securities business and Islamic financial business.

There are various regulations that have been enacted under the Financial Institutions Act to regulate banks in Uganda and these include: the Financial Institutions (Licensing) Regulations, Financial Institutions (Capital Adequacy) Regulations, Financial Institutions (Corporate Governance) Regulations, Financial Institutions (Liquidity) Regulations, Financial Institutions (Ownership Control) Regulations, Financial Institutions (Deposit Protection Fund) Regulations 2019, Financial Institutions (Revision of the Minimum Capital Requirements) Instrument 2022, Financial Institutions (Islamic Banking) Regulations 2018, Financial Institutions (Agent Banking) Regulations as amended, Financial Institutions (Preference and Appraised Book Value) Regulations 2023, Financial Institutions (Credit Reference Bureau) Regulations 2022, Financial Institutions (Capital Buffers and Leverage Ratio) Regulations, and Financial Institutions (Foreign Exchange Business) Rules as amended.

The supervision and regulation of financial institution business/banks is a preserve of the Central Bank – Bank of Uganda (BOU) whose mandate is derived from Article 161 of the Constitution of the Republic of Uganda, 1995 as amended, the Bank of Uganda Act Cap 51 and the Financial Institutions Act as amended.

The functions of BOU include but are not limited to supervising, regulating and disciplining financial institutions, maintaining monetary stability, being a banker to financial institutions, maintaining an external assets reserve, acting as an agent in financial matters to the government, and being a clearing house for cheque and other financial instruments for financial institutions, among many others.

Other legislation which cuts across the banking sector in Uganda includes the Anti-Money Laundering Act as amended, which provides for the prohibition and prevention of money laundering, the Capital Markets Authority Act Cap. 84, which establishes the Capital Markets Authority for the purpose of promoting and facilitating the development of an orderly fair and efficient capital markets industry in Uganda and makes provisions with respect to stock exchanges, stockbrokers and other persons dealing in security, and the Mortgage Act which regulates mortgages, among many others.

 2. Authorisation

 2.1 Licences and Application Process

Licences and Permitted Activities

The types of licences that are issued under the Financial Institutions Act as amended are determined by the financial activities to be carried out. These licences are the following.

Commercial bank licence

The activities authorised under a commercial bank licence include:

  • acceptance of call, demand, savings and time deposits withdrawable by cheque or otherwise;
  • provision of overdrafts and short- to medium-term loans;
  • provision of foreign exchange facilities;
  • acceptance and discounting of bills of exchange;
  • provision of financial and investment advice;
  • participation in inter-bank clearing systems; and
  • giving guarantees, bonds or other forms of collateral, and accepting and placing third-party drafts and promissory notes connected with operations in which they take part.

Merchant bank licence

The activities authorised under a merchant bank licence include:

  • acceptance of corporate call and time deposits;
  • provision of foreign exchange facilities;
  • facilitation of trade through the granting of acceptance facilities;
  • provision of corporate finance advisory services through share issues, rights issues, mergers and acquisitions and corporate reconstruction and private placement excluding underwriting arrangements;
  • issue of bonds, debt obligations and certificates in such loans as they may grant or any other instrument traded in the domestic market or abroad according to the regulations BOU may set forth; and
  • investment portfolio management, investment advisory services and nominee services.

Islamic bank licence

The activities authorised under the Islamic bank licence are limited to Shari’ah law compliant banking business.

Post office savings bank licence

The activities authorised under the post office bank licence are limited to acceptance of savings and fixed deposits and investment in government securities.

Mortgage bank licence

The activities authorised under the mortgage bank licence include:

  • receiving deposits of participation in mortgage loans and in special accounts;
  • granting of loans for the acquisition, construction, enlargement, repair, improvement and maintenance of urban or rural real estate, and for the substitution of mortgages taken out for that purpose;
  • giving of guarantees, bonds or other forms of collateral connected with the operations in which they may take part; and
  • obtaining of foreign loans and acting as intermediary in loans extended in local and foreign currency, having the previous authorisation of BOU for such loans exceeding a specified limit as prescribed by BOU.

Statutory or Other Conditions for Authorisation

BOU shall grant a licence to an applicant where the applicant:

  • demonstrates adequacy of the applicant’s capital structure, earning prospects, business plans and financial plans;
  • has the minimum required paid up cash capital of not less than UGX120 billion and demonstrates the ability to maintain its capital funds, unimpaired by losses at the prescribed minimum amount at all times;
  • demonstrates transparency in the ownership structure of the bank so as to enable the BOU to evaluate the institution’s substantial, direct and indirect shareholders and its corporate affiliations; and
  • demonstrates the competence and integrity of the proposed management and that the proposed management satisfies the fit and proper criteria set out in the Financial Institutions Act.

Application Process

The application process is commenced with lodging the prescribed form set out in Schedule 1 of the Financial Institutions (Licensing) Regulations to BOU. The prescribed form requires information including but not limited to:

  • name of the proposed financial institution;
  • personal information of the directors and the shareholders;
  • shareholding of each shareholder;
  • qualifications, experience, nationality and other relevant particulars of the proposed management and staff;
  • capital structure and earning prospects of the financial institution;
  • applicant’s business, financial plans and earnings forecasts, namely balance sheet, income statement and cash flow for at least three years, and sufficient detail;
  • summary of the applicant’s board risk management policies and management operating procedures; and
  • description of the applicant’s proposed organisational and management structure, reporting lines and responsibilities of its Board.

The licensing requirements checklist is available on BOU’s website.

The application is accompanied by certified true copies of the incorporation documents, proposed capital structure, an information sheet of the applicant, business plan, personal declaration forms for the directors, officers and individual credit references for each shareholder, director and officer from their banker.

Upon receipt of the application, BOU shall, within six months, consider and assess the application and grant the licence if satisfied with the application. BOU retains the right to reject the application where sufficient information is not rendered by the applicant. The process is extensive and may involve comments and queries from BOU.


The process of obtaining a licence may take 6–12 months depending on the engagement with BOU and the strength of the applicant.


The applicant is required to pay a non-refundable application fee of UGX1 million (approximately USD264.30), and licensing fees which vary depending on the type of licence sought.

 3. Control

 3.1 Requirements for Acquiring or Increasing Control Over a Bank

Change of Control

The control threshold is 5%. A person who wishes to allot, issue, transfer or register the transfer of 5% or more of any shares in a financial institution to another or acquire control of a financial institution, shall apply for approval in the prescribed manner to the Executive Director, Bank Supervision, Bank of Uganda. The application must contain sufficient detail of:

  • a statement of the applicant’s reason for the desire to acquire ownership of the shares;
  • the financial strength and ability of the applicant to provide additional capital if needed;
  • the ownership and operational structure of the financial institution after the allotment, issue or transfer of the relevant shares; and
  • clearance from the home central bank or equivalent in case the applicant is a foreign financial institution.

BOU shall, within three months, assess the application with due regard to public interest, the banking industry and the interests of the bank or its depositors and provide a detailed report. BOU shall grant its approval in writing if satisfied that the applicant meets the requirements. 

Shareholder Restrictions

The Financial Institutions Act restricts any individual or body corporate controlled by one individual or a group of related persons or a body corporate owned or controlled directly or indirectly by a group of related persons from owning or acquiring more than 49% of the shares of Ugandan banks. Reputable financial institutions or reputable public companies approved by BOU are exempted from this restriction.

The other restriction laid down by the Financial Institutions Act is that a Ugandan bank is prohibited from allotting or issuing or registering the transfer of 5% or more of any of its shares to a person without the written approval of BOU. Before the proposed transfer, the Uganda bank must prove to BOU that the acquisition of shares shall not be contrary to public interest or the interest of a financial institution or depositors and will not be detrimental to the financial services industry in general. The registrar of companies is also prohibited from registering such transfer or allotment of shares without the written consent from BOU.

The transfer of more than 5% of the shareholding of a Ugandan bank to a person or group of related persons without a notice of no objection from BOU is prohibited by the Financial Institutions Act. The notice of no objection must be obtained by the Ugandan bank prior to the transfer.

A person who does not satisfy the fit and proper test relating to shareholders cannot acquire more than 5% of the shareholding of a Ugandan Bank. The fit and proper criteria is prescribed in the Third Schedule of the Financial Institutions Act and focuses on the person’s general probity, competence and soundness of judgement for the fulfilment of the responsibilities, diligence, the interest of the deposits or potential depositors of the bank and the previous conduct of the person. Any appointment of a shareholder who is not a fit and proper person in accordance with the Financial Institutions Act shall have no legal effect.

Any transfer done in any of the above instances without the approval of BOU is deemed void and ineffective.

Nature of Regulatory Filings

As noted earlier, Ugandan banks are required to apply for the approval in the prescribed form for the bank or person that wishes to allot, issue, transfer or register the transfer of 5% or more of any of its shares to another or acquire control of a financial institution. BOU may require the applicant to provide further information to support the application where necessary.

 4. Supervision

 4.1 Corporate Governance Requirements

Corporate governance requirements applicable to Ugandan banks are laid out in provisions of the Financial Institutions Act and the Financial Institutions (Corporate Governance) Regulations, 2005 and the Consolidated Corporate Governance Guidelines issued by BOU. These impose minimum standards in relation to corporate governance. The corporate governance requirements focus on the responsibilities of the board of directors, independence oversight of bank management, priority to risk management and the need for independent audit functions.

A Ugandan bank must have not less than five directors who are fit and proper persons duly vetted and approved by BOU with at least four independent non-executive directors. Every financial institution must have at least two executive directors, resident in Uganda. The chairperson of the board must be an independent director possessing experience and resident in Uganda.

The operational structure of the board is guided by a board charter which contains guidance on the general duties and responsibilities of the directors, board composition, roles of the chairperson, managing director and executive directors, tenure and retirement age of directors, and remuneration, among other aspects.

Control Functions

The board of directors must constitute, amongst themselves, the following committees:

  • the audit committee, which shall review the internal audit reports, financial statements, internal controls, operating procedures and systems and programs of the bank;
  • asset and liability management committee, to perform search functions as the board may specify including establishing guidelines on the financial institution’s tolerance for risk and expectations from investment and monitoring of the financial institution’s policies, procedures and holding portfolio to ensure that goals for diversification, credit, quality, profitability, liquidity, community investment, pledging requirements and regulatory compliance are met;
  • risk management committee, which shall provide oversight of the overall risk strategy and the senior management’s activities in managing credit, market, liquidity, operational, legal and other risk;
  • credit committee, which is responsible for approving and overseeing compliance with the lending policy, delegating lending limits, and approving credit facilities that are above the sanctioning authority of management among others; and
  • compensation/remuneration committee, which shall provide oversight on the remuneration of senior management and other key personnel.

Ugandan banks are also required to appoint an internal auditor and an external auditor. The duties of an internal auditor shall include, but not be limited to, evaluating the reliability of the information produced by accounting and computer systems, providing an independent appraisal function and evaluating the effectiveness, efficiency and economy operations. All internal auditors of financial institutions are required to be members of the Institute of Certified Public Accountants of Uganda. The external auditor’s duty is to perform an audit of the financial statements of the financial institution and to give an opinion in accordance with the Financial Institutions Act and International Standards on Auditing. External Audit firms are periodically assessed and pre-qualified by BOU for purposes of providing external audit services to banks.

Ugandan banks are also required to develop a code of conduct which focuses on areas such as ethical risk, help foster a culture of honesty and accountability, conflicts of interest, fair and honest dealing, anti-discrimination, gifts and relationships with customers and provide guidance to directors in complying with applicable laws, rules and regulations. Its good practice for all directors to sign the code of conduct upon appointment.

 4.2 Registration and Oversight of Senior Management

Approval of Directors

Before the appointment of any director or any person in senior management of a Ugandan Bank, the approval of BOU must be obtained. Prospective directors are not permitted to attend any board meetings without the approval of the appointment by BOU. Senior management is composed of the executive officers and heads of the different departments in banks. 

The prospective director is nominated by a nominations committee or similar body after conducting a selection process that involves considering the knowledge, skills, integrity, reputation, ability to perform the duties and possible conflicts of interest, among others.

The prospective director must be a fit and proper person. The fit and proper criteria is prescribed in Third Schedule of the Financial Institutions Act and focuses on the director’s general probity, competence and soundness of judgement for the fulfilment of the responsibilities, diligence, the interest of the deposits or potential depositors of the bank and the previous conduct of the director. Any appointment of a director who is not a fit and proper person in accordance with the Financial Institutions Act shall have no legal effect.

Upon selection of the director, the bank shall serve a written notice to BOU of its nomination. BOU shall vet the proposed director within six months and notify the bank. BOU shall give a written approval if it is satisfied that the prospective director is:

  • above 18 years of age;
  • of sound mind and has not been declared of unsound mind by any court of law;
  • not an undischarged bankrupt;
  • a fit and proper person as in accordance with the fit and proper test prescribed in the Financial Institutions Act; and
  • not serving as a director of any other bank.

Roles of Directors and Accountability

The roles of directors are extensive but can be summarised in four key areas, namely: providing strategic direction, policy formulation, decision making and providing oversight of executive management. Directors are responsible for ensuring good corporate governance and business performance and ensuring that the business of the financial institution is carried on in compliance with all applicable laws and regulations and is conducive to safe and sound banking practices.

Directors stand in a fiduciary relationship to the bank and the shareholders and they have a duty to act in good faith and with utmost honesty. Directors are accountable to the shareholders of the company and must report to the shareholders.

 4.3 Remuneration Requirements

There are generally no remuneration requirements prescribed by law or BOU that are applicable to banks. Remuneration of employees in a bank is solely determined by, and at the discretion of, the bank. Guidance is provided by the compensation committee of the bank which has the function of providing oversight of the remuneration of senior management and other key personnel and ensuring that compensation is consistent with the institution’s culture, objectives, strategy and control environment. BOU does not exercise any specific supervisory right prescribed by law over remuneration in banks.


 5.1 AML and CFT Requirements

The primary legislation regulating money laundering and counter-terrorist financing is the Anti-Money Laundering Act (AMLA) as amended, and the Anti-Terrorism Act as amended, which criminalises any aid or financing of any preparation, commission or instigation of acts of terrorism. The AMLA was enacted in 2013 to criminalise the process of turning illegitimately obtained property into seemingly legitimate property and it includes concealing or disguising the nature, source, location, disposition or movement of the proceeds of crime.

Regulatory Supervision

The AMLA establishes the Financial Intelligence Authority (FIA) with a mandate to enhance the identification of the proceeds of crime and the combating of money laundering and ensure compliance with the AMLA. FIA exercises supervisory powers in relation to money laundering and counter-terrorism financing over banks.

AMLA and CFT Requirements

There are several obligations laid out by the AMLA applicable to banks in combating of money laundering and counter-terrorism financing. These include:

  • registration with the FIA as an accountable person;
  • identification of customers by the prospective customer’s true names, address including postal and residential, employment, and occupation at onboarding;
  • verification of identification information of prospective customers through due diligence measures. Identity verification is a continuous obligation throughout the existence of the relationship;
  • implementation of risk assessment measures to identify, assess, detect and monitor its money laundering and terrorism financing;
  • maintenance of records on customer identification information, account files information and any business correspondence for at least ten years;
  • recording and reporting each cash and monetary transaction involving a domestic or foreign currency exceeding UGX20 million;
  • monitoring and reporting of transactions which are inconsistent with a customer’s known legitimate business or personal activities or with the normal business for that type of account or business relationship, or a complex and unusual transaction or complex or unusual pattern of transactions. Such suspicious transactions are reported to the Financial Intelligence Authority;
  • where a person is a politically exposed person (PEP), obtaining the written approval of senior management before establishing a business relationship with that PEP person, establishing the source of wealth of that PEP and conducting constant monitoring of the business relationship with the PEP. PEPs are individuals who are or have been entrusted with prominent functions in a country, such as heads of state or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, and important party officials, as well as family members or close associates of such individuals;
  • conducting periodic anti-money laundering audits to assess the efficiency of the anti-money laundering measures in place; and
  • timely submissions of risk assessment reports, AML compliance reports, product risk assessment reports, suspicious transaction reports and AML audit reports to the FIA.

 6. Depositor Protection

 6.1 Depositor Protection Regime

The Financial Institutions Act as amended establishes a Deposit Protection Fund to act as a deposit insurance scheme to customers of deposit-taking institutions licensed by BOU. The Deposit Protection Fund of Uganda is the designated authority as the body responsible for management and control of the deposit protection fund.

The finances of the fund consist of monies contributed to the Fund by financial institutions and microfinance deposit-taking institutions, grants, income from investments of the Fund and borrowed money by the board. Every financial institution is required to contribute to the fund a sum of not less than 0.2% of the average weighted deposit liabilities of the financial institution in its previous financial year. A financial institution which does not pay its contribution shall be liable to pay to the Fund a civil penalty interest charge of 0.5% of the unpaid amount for every day for which the amount remains unpaid.

Every customer deposit in a financial institution and a microfinance deposit-taking institution is protected by the Deposit Protection Fund for an amount up to UGX10 million (approximately USD2,643.04). Upon closure of a financial institution or a microfinance deposit-taking institution which necessitates a payout, the customer may lodge a claim with the Deposit Protection Fund Board for payment of the protected deposit, which is the amount being the aggregate credit balance of any accounts maintained by a customer at a financial institution less any liability of the customer. The Deposit Protection Fund shall make payment of the protected deposit to customers within 90 days after closure of the financial institution and shall become entitled to receive from the financial institution the amount paid to customer. The Deposit Protection Fund is not liable to pay any interest on protected deposits.

All deposits in a licenced financial institution are covered by the Deposit Protection Fund.

 7. Bank Secrecy

 7.1 Bank Secrecy Requirements

Confidentiality is a fundamental aspect of the banker-customer relationship under Ugandan law and its origin can be traced from common law. Ugandan banks owe their customers a duty of confidentiality. This duty is supported by Article 27(2) of the Constitution of the Republic of Uganda which protects the right of privacy. Banks are obliged to maintain appropriate confidentiality in all transactions with their customers. It is an implied term in banking contracts that the bank shall not disclose information concerning the customer’s affairs without consent.

Confidentiality extends to all information including the customer’s personal, account and transactional information obtained by the bank arising out of the banking relationship with the customer, whether obtained from the customer or a third party. The duty of confidentiality may be overridden in four instances, namely where the disclosure is under compulsion of law, there is a duty to the public to disclose, the interests of the bank require disclosure, and the disclosure is made by the express or implied consent of the customer.

The customer may claim damages from the bank where there is unlawful disclosure in breach of confidentiality.

 8. Prudential Regime

 8.1 Capital, Liquidity and Related Risk Control Requirements

Adherence to Basel Standards

BOU is currently implementing the Basel II Capital Accord. In a circular referenced rEDS.306.2 and dated 11 February 2021, BOU commenced the implementation of Basel II and directed that the full transition to Basel II was effective from 1 January 2022. Whilst the implementation of the Basel II Capital Accord is ongoing, BOU is also implementing some elements from the Basel III. The Basel III focuses on minimum capital requirements, leverage ratio and liquidity requirements. In furtherance of the implementation of the Basel III Capital Accord and Basel III aspects and the aim of strengthening regulation, supervision and risk management within the banking industry, BOU has revised the capital adequacy requirements and the minimum required capital requirements, among others.


The Financial Institutions (Revision of Minimum Capital Requirements) Instrument 2022 revised the minimum paid-up capital requirements for banks. Commercial banks are required to maintain a minimum paid-up capital of UGX120 billion (approximately USD31,716,468). The minimum capital funds unimpaired by losses of a licensed bank were also revised to an amount not less than UGX120 billion) approximately USD31,716,468.

The capital buffers required of financial institutions are provided for in the Financial Institutions (Capital Buffers and Leverage Ratio) Regulations, 2020 and these are:

  • capital conservation buffer of 2.5% comprised of a core capital (Tier 1) of not less than 12.5%, a total capital of not less than 14.5% (all percentages of total risk-adjusted assets plus risk-adjusted off-balance sheet items);
  • systemic risk buffer ranging from 0% to 3.5% of the total risk-adjusted assets plus risk-adjusted off-balance sheet items over and above the minimum ongoing core capital requirements and the total capital requirements and the capital conservation buffer; and
  • countercyclical capital buffer ranging from 0% to 2.5% of the total risk-adjusted assets plus risk-adjusted off-balance sheet items.

Financial institutions are also required to have a leverage ratio equal to or greater than 6% of the total balance sheet and off-balance sheet assets.

BOU requires banks to have the core capital and total capital to total Risk Weighted Assets (RWAs) ratios of at least 8% and 12% respectively, which is above the Basel III requirements of 6% and 8% respectively.


The liquidity requirements are provided for in the Financial Institutions (Liquidity) Regulations, 2005. A financial institution is required to maintain liquid assets amounting to not less than 20% of the deposit liabilities on a weekly average basis. The liquid assets include legal tender in Uganda and any other currency, balances held at the Central Bank for cash reserves and clearing purposes, moneys at call and balances at banks in Uganda, Uganda treasury bills maturing within a period not exceeding 91 days, government securities, uncommitted balances at banks outside Uganda withdrawable on demand and money at call outside Uganda and commercial bills and promissory notes which are eligible for discount by commercial banks.

Financial institutions must also have an asset and lability management committee as discussed in 4.1 Corporate Governance Requirements.

BOU also requires financial institutions to have a policy on liquidity management focused on aspects such as good management information systems, central liquidity control, analysis of net funding requirements under alternative scenarios, diversification of funding sources and contingency planning.

Risk Management

Financial Institutions, as part of the corporate governance requirements, are required to have a risk management committee, which shall provide oversight of the overall risk strategy and the senior management’s activities in managing credit, market, liquidity, operational, legal and other risk. BOU has also issued various guidelines on risk management such as Money Laundering/Terrorist Financing/Proliferation Financing Risks Assessment Guidelines to aid financial institutions in managing risk.

The other requirements relate to reporting by financial institutions, submission and publication of annual and quarterly financial statements, disclosures and notifications to BOU.

 9. Insolvency, Recovery and Resolution

 9.1 Legal and Regulatory Framework

BOU has developed the legal and regulatory framework governing the insolvency, recovery and resolution of failing banks significantly since the closing of four insolvent banks in 1998/1999. The Financial Institutions Act 2004 as amended was enacted to strengthen the insolvency procedures of financial institutions and lays down various mechanisms in which a failing bank can be addressed. The overall responsibility of overseeing the insolvency, recovery and resolution of a failing bank falls to BOU and it may take various actions depending on the circumstances of the failing bank. These actions include corrective actions that the financial institutions must comply with, placing the institution under statutory management or receivership and liquidation.

The corrective actions which may be taken by BOU include halting the failing bank from declaring and distributing any dividends, prohibiting the bank from paying any bonuses or making salary increments, among others. The failing bank shall also be requested to submit a capital restoration plan. In a case of failure to submit the capital restoration plan or to implement the plan, BOU shall impose further restrictions.

Statutory management by BOU is another mechanism in which a failing bank can be resolved. BOU may take over the management of a failing bank where: the failing bank is conducting its business in a manner contrary to the Financial Institutions Act, the continuation of its activities is detrimental to the interests of depositors and the licence has been revoked. In such circumstances, BOU shall either continue or discontinue any of its operations as a bank, reorganise or liquidate the bank, close the institution and sell the failing bank.

BOU is also empowered under the Financial Institutions Act as amended to place a bank under receivership. A bank may be placed under receivership where it is determined by BOU that the bank will not be able to meet the demands of depositors or pay its obligations in the normal course of business, where the bank has incurred or is likely to incur losses that will deplete all or substantially all of its capital and where the bank is significantly undercapitalised. Once the bank is placed under receivership, BOU or any other person appointed by BOU shall become the receiver of the bank and the bank in receivership shall be protected from any enforcement of any security over its property and any proceedings, execution and legal process.

During the receivership of the bank, BOU, with the aim of protecting interest of depositors, minimising costs to the Deposit Protection Fund and ensuring stability of the financial sector, shall consider and implement recovery options such as a merger with another bank, the purchase of assets and liabilities by another bank, sale of the bank in receivership and liquidation of the bank in receivership.

Compulsory liquidation may be commenced by BOU or the person appointed by BOU. A bank may, with written approval from BOU, apply to the High Court for voluntary liquation. BOU or any person appointed by BOU shall be the liquidator of the bank. Upon commencement of the liquidation process of the bank, the bank shall cease operations, except those which are incidental to the orderly realisation, conservation and preservation of its assets and the settlement of its obligations.

Uganda is a member of the Financial Stability Board (FSB) and the FSB Key Attributes of Effective Resolution Regimes, such as transfer of the assets and liabilities of the failing bank, are embedded in the Financial Institutions Act as amended. The implementation of the FSB Key Attributes of Effective Resolution Regimes is spearheaded by BOU and the Deposit Protection Fund.

The insolvency preference rules applicable to deposits have been discussed in 6.1 Depositor Protection Regime. Payment of any claims in insolvency shall be made according to ranking prescribed in the Financial Institutions Act. First ranking in payment of claims is given to the Deposit Protection Fund, second to the liquidator for all expenses incurred, third to employees for all wages and salaries due, fourth to secured creditors in pari passu; fifth to depositors for deposits which are in excess of the protected deposit amount and lastly to other creditors ranking in pari passu.

Uganda recently enacted the Financial Institutions (Preference and Appraised Book Value) Regulations 2023, which provide for enforcement of close-out netting under International Swaps and Derivatives Association Master Agreement (ISDA), Global Master Repurchase Agreement (GMRA) and Global Master Securities Lending Agreement (GMSLA) contracts with financial institutions. The Regulations permit netting off, the delivery, payment, transfer, substitution or exchange of cash, margin, collateral, credit support or any other interests or assets from the financial institution where the financial institution is a party to a specified financial contract and is placed under management takeover, or closed.

 10. Horizon Scanning

 10.1 Regulatory Developments

Islamic Banking

The Financial Institutions (Amendment) Act, 2023, which was assented to by the President of Uganda in June 2023, repealed Section 115B(2) that grants the Central Shari’ah Advisory Council the power of approving any Islamic Banking product to be offered by a financial institution. The effect of this amendment is to allow the licensed financial institutions to offer Islamic banking products in Uganda without any approval from the Central Shari’ah Advisory Council. Consequently, BOU granted its first Islamic banking licence to Salaam Bank Uganda, a subsidiary of a Djibouti-based bank, in September 2023. This amendment will strengthen the banking industry in Uganda and will make a significant contribution to the growth and advancement of Uganda’s financial sector.

Minimum Capital Requirements

The Financial Institutions (Revision of Minimum Capital Requirements) Instrument 2022 require banks to have a minimum paid capital of UGX150 billion by 30t June 2024, invested initially in such liquid assets in Uganda as BOU may approve. The implication of this requirement is that banks will have difficulty in raising this significant capital, especially the indigenous banks. Larger and foreign-owned banks are better positioned, while smaller, indigenous banks face greater challenges in meeting Uganda’s increased minimum bank capital requirements.

Agent Banking

The Financial Institutions (Agent Banking) (Amendment) Regulations, 2023 amended the prerequisites for conducting agent banking in Uganda. The duration for which an applicant must have operated an account in the licensed financial institution which they seek to act for as an agent was amended from six months to 12 months. Agent banking is a developing area in the banking industry and this amendment limits the agent banking business in Uganda despite it being the most effectively used.

Online Business Registration System (OBRS)

The Uganda Registration Services Bureau (the Companies Registry) rolled out a fully-fledged electronic registration system, the OBRS, in June 2023, which facilitates seamless registration of companies, business names, legal documents, insolvency and other related services. As a result, the Companies Registry requires all entities that were registered/incorporated before 9 December 2022 to upload their company data onto OBRS and have an OBRS account for all company filings.

Ultimately, all legal documents are to be filed exclusively through the OBRS system, which eases filing of transactional documents and registration of such transactional documents.

Beneficial Ownership Requirements

In a bid to combat money laundering and terrorism financing, Uganda has promulgated various laws regarding beneficial ownership information including the Companies (Beneficial Owners) Regulations that require corporate entities to disclose the personal data and information regarding the nature of ownership or control of their beneficial owners. A beneficial owner is considered to be a natural person who has final ownership or control of a company/partnership/trust or a natural person on whose behalf a transaction is conducted in a company/partnership/trust and includes a natural person who exercises ultimate control over a company/ partnership/trust.

Company Secretaries for Banks

BOU recently issued a directive instructing all supervised financial institutions to stop outsourcing company secretaries effective 31 December 2023 and have in-house company secretaries. Non-compliance could attract regulatory sanctions. The objective behind this move is to fortify corporate governance, which is an essential aspect of the banking industry.

 11. ESG

 11.1 ESG Requirements

Environmental, Social and Governance (ESG) in the banking industry presently has no specific binding legal framework in Uganda. However, BOU has prioritised ESG principles in its policies, processes and operations as well as the banking sector. BOU recently recast its mission to read “To promote Price Stability and a Sound Financial System in Support of Socio-Economic Transformation in Uganda”. Financial institutions are encouraged by BOU to leverage emerging technologies which have been recognised as critical tools for addressing social, environmental and economic challenges.

In BOU’s strategic plan for 2022–2027, BOU will institutionalise an ESG framework across the regulated financial institutions so that financial institutions can prioritise social good and sustainability in addition to making profits for shareholders. In this strategic plan, BOU aims to pursue various initiatives for sustaining financial stability, such as:

  • issuing guidelines to financial institutions on disclosing climate-related risks in their existing financial reporting systems;
  • integrating climate-related risks in the stress testing and domestic systemically important bank (DSIB) analytical frameworks;
  • mandating disclosure of how climate-related risks are provided for within the Internal Capital Adequacy Assessment Process (ICAAP), a central component of risk-based supervision; and
  • introducing a new ranking criterion for banks that considers their sensitivity to climate and environment-related issues and their impact on their balance sheets and continued sustainability.

In BOU’s efforts to promote price stability and a sound financial system in support of socio-economic transformation in Uganda, BOU launched the Sustainability Standards and Certification Initiative (SSCI) of the European Organization for Sustainable Development (EOSD), which is a framework aimed at engendering sustainability in the BOU. This certification will provide a framework for financial institutions to assess and improve their sustainability performance and evaluate financial institutions’ ESG practices.


William Kasozi 

Jonathan Kiwana

Derrick Kuteesa

Brian Banana Baine