Bank of Uganda is seeking the intervention of Parliament to ensure that regulations regarding governance and supervision of the financial sector are given urgent attention.
The bank officials made the proposal while meeting MPs from different committees of parliament on Friday. Led by Deputy Governor Michael Atingi-Ego, the Central Bank officials held a workshop with MPs from the committee on Commissions, Statutory Authorities and State Enterprises (COSASE), Committee on Finance, Committee on Climate Change, and others.
Dr. Tumubweine Twinemanzi, the Executive Director Supervision in Bank of Uganda proposed that parliament considers that amendments related to the financial sector can always be brought as part of the Finance Bill which is done every year.
Ahead of the budget approval, parliament every financial year considers a raft of finance Bills that include the tax bills and finally the Appropriation Bill.
“If you look at the process it takes from the time we initiate the idea for an amendment to the time it actually gets to parliament…it is so long. The average is about 18 to 24 months. And if the banking sector is constantly changing and it is taking you two years to come up with a regulation to manage those changes, then we are moving forward in reverse,” said Tumubweine.
He said that the consideration of financial sector regulations annually is working well in neighboring Kenya.
Tumubweine further explained the need for a faster legislation-making process for the financial sector saying that they are using the Financial Institutions Act, 2004 which had slight amendments in 2016 yet the Banking Sector has drastically changed from what it looked like in 2004 to today and the coming years.
“If it is going to take three to four years to amend the law to enable us to manage and supervise the banking sector which is moving very fast…it doesn’t wait for us to catch up…we are potentially putting at risk the very customers, consumers and depositors we are supposed to be protecting,” he emphasized.
The Executive Director Supervision also noted that it is time that parliament sought a central consumer protection law.
Tumubweine also asked for the enhancement of the existing legal framework especially regarding contract enforcement and resolution of disputes.
He said that currently in the courts of law, close to 4 Trillion Shillings worth of loans are in the contest between banks and borrowers.
“To put that into context, the total loans and advances in this economy as of 30th September is slightly under 18 trillion Shillings. So if you have a system where almost 25 percent of loans are tired up in court cases when the banks are making a lending decision tomorrow, they take that into consideration and that partly explains why we pay the high rates of interest,” Tumubweine noted.
Manjiya County MP John Baptist Nambeshe questioned how far the Central Bank has gone in initiating the proposed central law on Consumer Protection.
The Central Bank officials said that this proposed Bill will be coming to parliament soon.