Three Banks Transition to Tier II Credit Institutions

Three commercial banks - ABC Capital Bank, Guaranty Trust Bank, and Opportunity Bank - are set to transition from Tier I commercial banks to Tier II credit institutions, as announced by the Bank of Uganda.

This move comes in response to recent regulatory changes by the Bank of Uganda, which has increased the minimum paid-up share capital requirement for Tier I Commercial Banks.

By the end of 2022, the requirement stands at UGX 120 billion (approximately USD 32.26 million), rising to UGX 150 billion (approximately USD 40.32 million) by June 30, 2024.

The affected banks now have a three-month window to complete the transition, including phasing out products and processes that require a Tier I license.

Michael Atingi-Ego, Deputy Governor of the Bank of Uganda, emphasized that the transition period aims to ensure a smooth service transition for customers and mitigate any potential disruption to financial sector stability.

The decision to transition to Tier II credit institutions reflects strategic shifts and repositioning efforts by the respective boards of directors.

Despite the change in status, the banks are adequately capitalized and meet the minimum requirements for a Tier II license, as confirmed by the Bank of Uganda.

Guaranty Trust Bank Uganda, which announced its intention to transition in June 2023, cited its current paid-up share capital position as a driving factor. With a focus on Retail and SME Banking, the transition aligns with the bank's core strengths.

Similarly, ABC Capital Bank and Opportunity Bank have undergone transformations in their journey. ABC Capital Bank, originally a Micro Finance Institution, evolved into a commercial bank with strategic investments, while Opportunity Bank transitioned from an NGO program to a Tier II credit institution before obtaining its commercial banking license.