Stanbic Sees Ugandan Banks Consolidating on New Capital Rulesby
Lenders in Uganda may be forced to enter mergers or takeovers when the regulator raises core capital requirements by the end of the year, according to the country’s largest bank.
At least four of the country’s 25 banks are making losses, with the 10 biggest lenders accounting for as much as 70 percent of business, Stanbic Bank Uganda Ltd. Chief Executive Officer Patrick Mweheire said Wednesday in an interview in the capital, Kampala.
“Twenty five banks are too many,” he said. “Ten may be too few.”
Uganda’s plans to bolster capital rules to protect the industry from shocks comes as Nigeria in June delayed the implementation of regulations in a bid to encourage lending with the economy headed toward a recession.
The Bank of Uganda plans to raise core capital requirements to 10 percent of risk weighted assets, from 8 percent, Charles Abuka, director for financial stability, said by e-mail. Banks also need an additional capital conservation buffer of 2.5 percent to conform with requirements among partner states in the East African Community. Systemically important institutions will be charged an extra 1 percent to 1.25 percent of their risk-weighted assets.
Lenders will be prevented from paying dividends or bonuses if they fail to meet minimum capital levels, Abuka said.