Ugandan banks face higher capital requirements
The minimum capital requirement will be raised to 10 per cent of risk-weighted assets.Commercial banks in Uganda will be required to hold more capital by the end of December, the governor of the Bank of Uganda (BoU), Emmanuel Tumusiime-Mutebile, has announced.
"In line with the Basel III reforms and the agreements reached between the central banks of the East African Community, we are raising the minimum statutory capital adequacy ratios at the end of December 2016, to lock in most of the higher capital that banks currently hold," he said, quoted by The Monitor.
"The minimum core capital requirement will be raised to 10 per cent of risk-weighted assets and banks will also be required to hold a capital conservation buffer of 2.5 per cent of their risk-weighted assets," Mr Mutebile added.
Currently, commercial banks are required to hold a core capital requirement of eight per cent of risk-weighted assets.
This new requirement comes after the number of non-performing loans (NPLs) in Ugandan banks rose by 1.2 per cent in 2015, according to figures from the BoU.
Experts in the country believe that high bank lending rates are responsible for this increase in NPLS. Commercial interest rates now range in excess of 25 per cent per annum.
The ratio of liquid assets to total deposits was 46.4 per cent, well above the minimum requirement of 20 per cent.