Cabinet moves to stop ownership of commercial banks by relatives

Cabinet seeks to stop ownership of commercial banks by individuals. Photo by Stephen Wandera.  

By Ismail Musa Ladu

In Summary

The Cabinet has also directed the government to provide legislations on a number of financial products, including mobile money and Islamic banking.

 

The Cabinet has approved a resolution that prevents majority ownership of a commercial bank by persons related by either blood, kinship or even by association.

The resolution says it would be illegal for people related as such to own up to 49 per cent of the bank’s entity.

Ms Rosemary Namayanja, the Minister for Information, said the Cabinet had instructed the Finance ministry to prepare necessary legislation to end such practices - preventing related people from owning up to 49 per cent of a financial institution.

“The government has prohibited ownership of more than 49 per cent of a financial institution by a group of people,” said Ms Namayanja in a media conference in Kampala last week.

She added: “This is to avoid a certain group from influencing interests that may not be helpful - influence peddling.”

The Cabinet resolution seeks to re-emphasise the Bank of Uganda regulation that prevents individual ownership of financial institutions.

According to Bank of Uganda, it is illegal for a financial institution to be owned by an individual.

“This is not just a cabinet resolution but it is a requirement under the Financial Institutions Act of 2004. It is therefore law in Uganda,” Mr Jan Tibamwenda, the Bank of Uganda director for communications said in an interview.

“Financial institutions in Uganda must be owned by multiple shareholders because of the desire to avoid a situation where a single person or a group of related people control the affairs,” he added.

Asked if there is any bank that will be affected by the resolution Mr Tibamwenda said currently all banks had followed the laws governing commercial banking.

Currently, Uganda has 25 banks with a banking population of about four million bank accounts shared between institutions and individuals.

The chairman of Uganda Bankers Association, Mr Philip Odera, said he would not provide an immediate response on the matter as he was out of the country.

Meanwhile, the Cabinet has also agreed to merge deposited insurance funds into deposit protection funds as separate entities.

The fund shall have up to 90 days to pay protected deposits and have its employees protected from liability for anything done in good faith.