GTBank loses business financial institution standing after Financial institution of Uganda downgrade

GTBank loses business financial institution standing after Financial institution of Uganda downgrade

The Bank of Uganda (BoU), Uganda’s apex financial institution, has reclassified Guaranty Trust Bank (GTBank) from a Tier I business financial institution to a Tier II credit score establishment. The financial institution, alongside two others, had utilized for the brand new standing following anticipated failure to fulfill the brand new capital buffer necessities. The opposite banks affected are Kenya’s ABC Capital Financial institution and Alternative Financial institution.

The reclassification means the three banks can solely settle for buyer deposits and maintain financial savings accounts. Nevertheless, they won’t be able to open present accounts for patrons or commerce in international foreign money.

“The change of the standing of the three business banks to credit score establishments follows selections by the respective boards of administrators, to undertake a strategic shift and reposition these establishments to serve their core buyer base,” BoU introduced in a press release on Wednesday.

In 2023, Uganda’s finance ministry handed laws requiring business banks working within the nation to have at the very least $38.6 million as a capital buffer, up from $6.4 million. The three lenders, fearing they might not meet the June 30, 2024 deadline, utilized to be reclassified.

“These three establishments have been granted a transition interval of three (3) months, ranging from April 1, 2024, to June 30, 2024, throughout which they are going to make enough preparations to section out merchandise and processes that require a Tier I License,” BoU mentioned.

The central financial institution added that GTBank, ABC Capital Financial institution and Alternative Financial institution meet the capital necessities for a Tier II license.

In a press release seen by TechCabal, GTBank mentioned it utilized for the reclassification as a result of it believes that is the correct choice for the financial institution which is aligned with the goals of its Holding Firm, contemplating international financial realities.

“Persevering with operations as a Tier 2 Credit score Establishment is inside the Financial institution’s present capital base and can enable us play to our core strengths in Retail and SME Banking,” mentioned Jubril Adeniji, Managing Director, of GTBank Kenya and Head of the East African area. “As we make this transition, we are going to proceed to assessment our positioning inside the Ugandan banking sector consistent with our goal of maximising shareholder worth.” 

Underneath the brand new laws, the minimal capital requirement for a Tier II license is $6.4 million from $275,802. Different monetary establishments affected by the brand new directives embody microfinance deposit-taking establishments, which is able to now have to boost $2.5 million, and international change bureaus.

General, about seven banks have but to fulfill the brand new capital necessities forward of the deadline.

*Editors notice: A earlier model of this text confirmed that GTBank was downgraded. This has been adjusted.

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