The Bank of Uganda (BoU), Uganda’s apex bank, has downgraded Guaranty Trust Bank (GTBank) from a Tier I commercial bank to a Tier II credit institution. The bank, alongside two others, had applied to be downgraded following anticipated failure to meet the new capital buffer requirements. The other banks affected are Kenya’s ABC Capital Bank and Opportunity Bank.

The downgrade means the three banks can only accept customer deposits and hold savings accounts. However, they will not be able to open current accounts for customers or trade in foreign currency.

“The change of the status of the three commercial banks to credit institutions follows decisions by the respective boards of directors, to adopt a strategic shift and reposition these institutions to serve their core customer base,” BoU announced in a statement on Wednesday.

In 2023, Uganda’s finance ministry passed regulations requiring commercial banks operating in the country to have at least $38.6 million as a capital buffer, up from $6.4 million. The three lenders, fearing they could not meet the June 30, 2024 deadline, applied to be downgraded.

“These three institutions have been granted a transition period of three (3) months, starting from April 1, 2024, to June 30, 2024, during which they will make adequate arrangements to phase out products and processes that require a Tier I License,” BoU said.

The central bank added that GTBank, ABC Capital Bank and Opportunity Bank meet the capital requirements for a Tier II license.

Under the new regulations, the minimum capital requirement for a Tier II license is $6.4 million from $275,802. Other financial institutions affected by the new directives include microfinance deposit-taking institutions, which will now have to raise $2.5 million, and foreign exchange bureaus.

Overall, about seven banks have yet to meet the new capital requirements ahead of the deadline.