Finance Trust Bank has downgraded to a credit institution losing it’s commercial bank status, the Central Bank of Uganda reported.
On Thursday, BOU confirmed it had issued a license authorizing finance trust bank to transit from a tier I commercial bank to a tier II credit institution license.
The authorization according to Kenneth Egesa, the director communications at BoU, starts effective 1st April,2026. This decision was reached after the finance trust bank’s board of directors decided to adopt a strategic shift and reposition the institution to serve its core customer base better.
Upon discovering that the bank is adequately capitalized and meets the minimum capital requirements for a tier II institution, BoU issued a transition license.
Finance Trust Bank has been granted a three-month transition period from 1 January 2026 to 31 March 2026 to phase out products and processes that require a Tier 1 commercial bank license. The move according to Egesa is intended to ensure a smooth service transition for its customers and to mitigate any disruption to financial sector stability.
Understanding Commercial Banks Vs Credit Institutions
Commercial banks provide a wide range of financial services, including savings and checking accounts, loans, mortgages, and investment services. They also engage in commercial activities like underwriting securities and providing advisory services. Credit institutions, on the other hand, focus mainly on providing loans and credit to individuals and businesses. They may offer savings accounts and other basic banking services, but they primarily specialize in lending activities. A bank may downgrade from a commercial bank to a credit institution if it is unable to meet the higher capital requirements set by the regulator for commercial banks. This could occur due to various reasons, such as financial difficulties, profitability challenges, or strategic shifts in business focus.
It should be recalled that in July, 2023, the Minister of Finance, Matia Kasaija, issued the Financial Institutions (Revision of Minimum Capital Requirements) Instrument, 2022, revising the minimum capital required for a financial institution license. Under the instrument, commercial banks were required to increase their minimum paid-up capital of Shs. 120 billion and credit institutions by Shs. 20 billion. These capital thresholds were raised to Shs. 150 billion for commercial banks and Shs. 25 billion for credit institutions by June 2024.
By downgrading to tier II credit institutions, it means that Finance Trust Bank failed to meet the minimum capital required for a financial institution license. However, the bank can upgrade back to tier 1 after recovering from the current financial difficulties.
Management Speaks Out
Bank management has reassured bankers that the transition will not affect banking services, reaffirming safety of the bankers’ money.
“All our services will remain available across the bank’s nationwide branch networks and service points. As we make this strategic transition, we are mindful of the great performance that the bank is experiencing and the opportunities in both new and existing business segments,” Management said. “We commit to seamless transition process while ensuring total compliance with all regulations and best banking practices pertaining tier II Credit Institutions throughout the change process.”
About Finance Trust Bank
Finance Trust Bank founded in 1984 as Uganda women’s Finance Trust Limited rebranded to Uganda Finance Trust Limited, a tier III financial institution , recognized as a micro finance deposit -taking institution under the supervision of the bank of Uganda before being granted a full commercial banking license on 11 November 2013.
The bank joins other banks including but not limited to ABC Capital Bank, Guaranty Trust Bank and opportunity Bank who became Tier II institutions after the minister of finance, in consultation with the bank of Uganda signed new regulations raising minimum capital levels for commercial Banks from 25 Billion to 150 Billion Uganda shillings by 30 June 2024.
