BANK OF UGANDA ANNUAL SUPERVISION REPORT December 2014 | Issue No. 5 © Bank of Uganda 2014 Address: 37/45 Kampala Road Postal: P.O. Box 7120, Kampala Tel: +256 414 258 441-6 Fax: +256 414 233 818 Email: [email protected] Web: www.bou.or.ug ISSN print: 2079-6293 ISSN web: 2079-6307 Contents ABBREVIATIONS ........................................................................................................................................................... v FOREWORD ................................................................................................................................................................ vii PART I: SUPERVISION OF FINANCIAL INSTITUTIONS ............................................................................................. 1 Chapter 1: Supervision of Financial Institutions ..............................................................................................................2 1.1 Introduction ..................................................................................................................................................2 1.2 On-site inspection ........................................................................................................................................2 1.3 Off-site analysis of banks ..............................................................................................................................2 1.4 Offsite analysis of Non-Bank Financial Institutions ...................................................................................... 4 Chapter 2: New Developments and Regulatory Reforms to Strengthen the Financial Sector ......................................... 5 2.1 Introduction .................................................................................................................................................. 5 2.2 Licensing and approvals ............................................................................................................................... 5 2.3 Regulatory reforms ...................................................................................................................................... 6 2.4 Mobile money services ................................................................................................................................. 7 2.5 Oversight of payment systems ..................................................................................................................... 7 2.6 Credit Reference Bureau (CRB) services ....................................................................................................... 9 2.7 Deposit Protection Fund .............................................................................................................................. 9 2.8 Enhancing access to financial services ......................................................................................................... 9 2.9 Strengthening capacity for supervision ........................................................................................................ 9 2.10 Regional cooperation.................................................................................................................................. 10 2.11 Crisis management framework ................................................................................................................... 11 2.12 Ongoing and planned activities for 2015 ..................................................................................................... 11 PART II: ASSESSMENT OF FINANCIAL STABILITY .................................................................................................. 13 Chapter 3: Banking Sector Performance ...................................................................................................................... 14 3.1 Introduction ................................................................................................................................................ 14 3.2 Changes in banks’ assets and liabilities ....................................................................................................... 14 Annual Supervision Report December 2014 | Bank of Uganda ii 3.3 Adequacy of banks’ capital ......................................................................................................................... 14 3.4 Funding and liquidity .................................................................................................................................. 15 3.5 Performance of credit ................................................................................................................................. 15 3.6 Earnings and profitability ............................................................................................................................ 17 3.7 Sensitivity to market risk ............................................................................................................................ 18 3.8 Performance of Domestic Systemically Important Banks ............................................................................ 18 3.9 Conclusion .................................................................................................................................................. 18 Chapter 4: Performance of Non-Bank Financial Institutions ......................................................................................... 19 4.1 Introduction ................................................................................................................................................ 19 4.2 Credit institutions ....................................................................................................................................... 19 4.3 Microfinance Deposit-taking Institutions (MDIs) .........................................................................................20 4.4 Foreign Exchange Bureaux and Money Remitters ....................................................................................... 21 Chapter 5: Macroprudential Assessment and Outlook .................................................................................................22 5.1 Introduction ...............................................................................................................................................22 5.2 Credit Risk ..................................................................................................................................................22 5.3 Funding, Liquidity and Market Risks ...........................................................................................................22 5.4 Domestic Systemically Important Banks .................................................................................................... 23 5.5 Outlook and Way forward .......................................................................................................................... 23 PART III: SPECIAL TOPIC .............................................................................................................................................24 Chapter 6: Mobile Money in Uganda ............................................................................................................................ 25 6.1 Introduction ................................................................................................................................................ 25 6.2 Status of the Mobile Money Services in Uganda ......................................................................................... 25 Source: Bank of Uganda ......................................................................................................................................... 25 6.3 Mobile Money Guidelines 2013 ................................................................................................................... 25 6.4 Key performance statistics for mobile money ............................................................................................. 27 Annual Supervision Report December 2014 | Bank of Uganda iii 6.5 Challenges ..................................................................................................................................................28 6.6 Way Forward ..............................................................................................................................................28 PART IV: STATISTICAL APPENDICES........................................................................................................................29 APPENDIX 1: FINANCIAL SOUNDNESS INDICATORS FOR SUPERVISED FINANCIAL INSTITUTIONS ........................ 30 APPENDIX 2: AGGREGATED BALANCE SHEETS FOR SUPERVISED FINANCIAL INSTITUTIONS ................................ 33 APPENDIX 3: INCOME STATEMENTS FOR SUPERVISED FINANCIAL INSTITUTIONS ................................................ 36 APPENDIX 4: CREDIT REFERENCE BUREAU ACTIVITIES (CUMULATIVE FIGURES) .................................................... 39 Annual Supervision Report December 2014 | Bank of Uganda iv ABBREVIATIONS AFRITAC Africa Regional Technical Assistance Centre AML Anti-money Laundering ATM Automated Teller Machine BIS Bank for International Settlements BCPs Basel Core Principles BOU Bank of Uganda COMESA Common Market for Eastern and Southern Africa CDD Customer Due Diligence CI Credit Institution CRB Credit Reference Bureau CRS Credit Reference System DPF Deposit Protection Fund DSIB Domestic Systemically