Three commercial banks in Uganda will transition from Tier I commercial banks to Tier II credit institutions, the Bank of Uganda said in a statement on Wednesday.

The three institutions, ABC Capital Bank, Guaranty Trust Bank and Opportunity Bank, now have three months to make the transition.

This will include phasing out products and processes that require a tier one license.

“The three months transition period is intended to ensure a smooth service transition for their customers and to mitigate any disruption to financial sector stability,” Michael Atingi-Ego, Bank of Uganda Deputy Governor said.

In a statement, Bank of Uganda said the change of status to credit institutions follows decisions by the respective boards of directors, to adopt a strategic shift and reposition the institutions.

It noted that the institutions are adequately capitalized and meet the minimum capital requirements for a tier two license.

This follows a recent increase in the minimum paid-up share capital requirement for Tier 1 Commercial Banks to UGX 120 billion (approx. USD 32.26 million) by the end of 2022, and to UGX 150 Billion (approx. USD 40.32Million) by 30th June 2024 which the three banks are not able to raise.

“They are avoiding being closed. They will get back some money staked at BOU. There will be less regulation…they are like becoming money lenders,” financial analyst summarised for this publication the impact of downgrade.

In June 2023, Guaranty Trust Bank Uganda, which was acquired by GT Bank in 2013, announced its intention to transition from a tier one commercial bank to a tier two credit institution as it had a current paid-up share capital position of UGX 41 billion (approximately USD 11.02 million), a third of what it would require to meet the first capital raise requirements.

“Continuing operations as a Tier 2 Credit Institution is within the Bank’s current capital base and will allow the bank to play to its core strengths in Retail and SME Banking,” Jubril Adeniji, Managing Director of Guaranty Trust Bank Kenya and Head of the East African region said.

ABC Capital Bank started its journey in 1993 as a Micro Finance Institution trading as Capital Finance Corporation Limited (CFC Ltd). ABC Bank (Kenya) made a strategic investment by acquiring a majority shareholding in 2008, kickstarting the process that led to CFCL’s licensing as a commercial bank two years later, and its rebranding.

Opportunity Bank, which began operations in the mid-1990s as an NGO program called Faulu Uganda, was licensed first as a Tier 2 credit institution, until it received its commercial banking license in 2019. It is majority owned by Luxembourg-based fintech MyBucks Group.


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