)
Andrew Otengo Owiny, the Board Chairman of PostBank, said the state-owned lender seeks to achieve the minimum Capital requirement of UGX 150 billion by 2024.
“Postbank is confident that it will achieve its minimum capital requirements of sh150b by June 2024. What I’m trying to emphasise here is that we have committed as the Board to give PostBank more money. We’re very happy that the government was able to take this bold step of making sure that the bank is not underfunded and it meets its financial obligations,” Otenga said on Tuesday as PostBank announced its financial results with a 19% increase in net profit for the year ended December 31st, 2022.
The move came just four months after Uganda’s Finance Minister Matia Kasaija signed a statutory instrument increasing minimum capital for banks by 500 per cent, from $6.67m to over $40m.
The idea, according to the Bank of Uganda (BoU), is to prevent commercial banks from falling off the cliff when economic shocks hit their clients.
)
)
)
According to the new rules, regulated micro financiers’ paid-up capital also increased to $6.6 million from $267,636.
The new capital requirement has thrown a spanner in Uganda’s banking sector works. The industry has reported one exit — Afriland First Bank last year after 16 months in the market.
Top Finance Bank was bought by Djibouti-based Salaam African Bank after the original owners failed to infuse capital. Orient Bank was acquired by I&M Group for the same reason.
Uganda last revised the paid-up capital for commercial banks in 2010 while that for credit institutions and deposit-taking institutions was last revised in 2004 and 2003 respectively, according to the BoU.
“The increase in paid-up capital is long overdue and is intended to match the dynamism in the economy, incentivize shareholder commitment, and enable institutions to withstand shocks and to converge with regional peers among whom Uganda effectively has the lowest paid-up capital,” Tumubweine Twinemanzi, the director in charge of supervision at BoU said.
The new rules follow trends in the region where some banks collapsed after reporting bad loans.