KAMPALA – January 29, 2026 – The Bank of Uganda [BoU] has downgraded Finance Trust Bank [FTB] from a Tier I commercial bank to a Tier II credit institution, in line with the regulatory requirements governing different categories of banks operating in the country. The change takes effect on April 1, 2026.
Finance Trust Bank was originally established in 1984 as a non-governmental organisation under the name Uganda Women’s Finance and Credit Trust Limited. It later transformed into a Microfinance Deposit-taking Institution [MDI] in 2004, before being granted a full commercial banking licence on November 11, 2013.
In November 2022, BoU announced a sixfold increase in the minimum paid-up capital requirement for Tier I commercial bank licences, raising it to Shs 150 billion from Shs 120 billion by the end of the first half of 2024. The move was aimed at strengthening financial sector stability and creating more room for loan growth.
Most of Uganda’s 25 commercial banks, including larger institutions, met the new requirement. However, three smaller banks opted to downgrade to Tier II credit institution licences, which require a significantly lower minimum capital of Shs 25 billion, although initially Shs 20 billion was required for a licence.
According to BoU, the change in FTB’s status follows a decision by the bank’s Board of Directors to adopt a strategic shift and better align its operations with its core customer base. “Finance Trust Bank is adequately capitalised and meets the minimum capital requirements for a Tier II licence,” said Kenneth Egesa, Director of Communications at BoU.
Any analyst said FTB requested to be downgraded to Tier II commercial bank status becuase it was having a challenge of meeting the share capital requirement of Shs 150 billion that Tier I commercial banks must have.
FTB’s Board and Management confirmed that the decision followed the issuance of a new licence by the central bank, adding that the move would allow the institution to focus more effectively on serving its target clients.
The ten largest banks, which together accounted for about 80 per cent of sector assets by the end of 2023, already had shareholders’ equity exceeding Shs 150 billion when the new requirement was announced. As a result, they were able to comply mainly by transferring existing equity reserves, particularly retained earnings, into paid-up capital, without the need to raise additional core capital. Consequently, the new requirement has not led to a sharp increase in overall sector capitalisation.
Smaller banks achieved compliance primarily by retaining profits and, in some cases, through capital injections from shareholders. This has significantly strengthened their capital positions, particularly in relation to high single-obligor and sectoral concentration risks.
However, given their relatively small market shares, the overall impact on sector capitalisation remains limited. There is no indication that any banks were forced to merge in order to meet the new capital threshold.
Summary
BoU significantly revised the minimum capital requirements for financial institutions, with new, higher standards taking effect by June 30, 2024, to enhance financial stability and resilience.
Here are the minimum paid-up capital requirements for different categories of banks in Uganda as of June 30, 2024:
Tier I: Commercial Banks
Minimum Paid-up capital: Shs 150 billion [increased from Shs 120 billion as of June 30, 2024]. These are the primary institutions for banking services, and most had already complied by the deadline.
Tier II: Credit Institutions
Minimum Paid-up capital: Shs 25 billion [increased from Shs 20 billion as of June 30, 2024]. Institutions in this category, such as those that downgraded from Tier I, must meet this threshold to continue operations.
Tier III: Microfinance Deposit-Taking Institutions [MDIs]
Minimum Paid-up capital: Shs 20 billion [as of Dec 31, 2022, per the Financial Institutions [Revision of Minimum Capital Requirements Instrument 2022].
Tier 4 & large SACCOs
Must maintain a minimum institutional capital of not less than 500 million shillings.
Ongoing capital adequacy requirements
Beyond the minimum paid-up capital, which acts as a license to operate], banks in Uganda must maintain specific ongoing capital adequacy ratios based on risk-weighted assets:
Core Capital [Tier 1]: Not less than 8 percent of total risk-adjusted assets.
Total Capital: Not less than 12 percent of total risk-adjusted assets.
Capital Buffers: A capital conservation buffer of 2.5 percent is required, bringing the minimum required total capital to 14.5 percent [12 percent + 2.5 percent].
These regulations, which align with Basel III standards, are aimed at ensuring that institutions can withstand economic shocks, with some smaller banks downgrading to Tier II to meet the lower capital requirements.
https://thecooperator.news/finance-trust-bank-empowers-2000-women-through-grow-project/
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