Consultancy Support To Uganda Bankers’ Association & Bank Of Uganda On Regulatory Reforms
Introduction.
In May 2020 FSD-Uganda contracted FRIENDS Consult to work for 15 months with Uganda Bankers Association and Bank of Uganda (BoU) to review the existing banking sector laws, regulations/ guidelines, identify limitations, constraints, and gaps they pose to the banking business, review laws and regulations from other regulatory authorities and jurisdictions, and recommend necessary improvements and adaptations. The assignment was completed to satisfaction and Bank of Uganda received the report, whose recommendations it is now working to implement.
The Client
Uganda Bankers’ Association is an umbrella organization for financial institutions licensed, regulated and supervised by Bank of Uganda (BoU). UBA and BoU formed a joint Regulatory Reform Committee to work with FRIENDS Consult on this project, funded by FSD Uganda.
UBA, the main beneficiary of the project, has several vital roles in the banking sector including standardization of common, non-proprietary practices, collaboration, capacity building, information sharing, advocacy for reforms, consumer education, response to sector threats and opportunities, liaison with the regulator, and international networking.
Rationale and outcome of the project
Both BoU and UBA realized the need for reforms in the banking for reasons such as:
- Improved financial stability, where a well-regulated banking sector contributes optimally to national economic growth and development.
- Enhanced risk management amidst rapid technological changes in the sector, to adequately mitigate credit, liquidity, operational, legal/ compliance, cyber and other risks, thus reducing the likelihood of financial crises.
- Responsible financing, ensuring that suitable credit is available and affordable to individuals and businesses, yet not over-indebting them.
- Consumer protection, resulting into increased consumer confidence in the banking system and enhanced use of it.
- Financial inclusion, bringing more people into the formal financial system, providing them with access to savings, credit, and other financial services.
- Enhanced governance, especially improving board oversight, transparency, and accountability, to ensure FIs are run more safely and soundly.
- Preventing sector abuse, including Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF
- h) Support to technology and innovation, to push the frontiers of financial inclusion and related risk control.
- i) Investor Confidence -a well-regulated and stable banking sector boosts confidence of local and foreign investors, attracting more investment, thus contributing to economic growth.
Outcome of the project.
More than 120 concrete recommendations were made for improvement in the areas of Credit, Compliance, Legal, Operations, Clearing, Finance, Treasury, Credit Reference Bureau (CRB), Information and Communications Technology (ICT), Agent Banking/Digital Financial Services, and Governance
“…the recommendations of this report, which is a culmination of 15 month’s work, should help us in improving regulations in the sector…” Dr. Michael Atingi-Ego – Deputy Governor, BoU at the report handover ceremony.
Article by Keren Obara – Project Officer FCL.