The Effectiveness of Central Bank in Regulating Banking Sector ~Nuganda

TABLE OF CONTENTS 

CHAPTER ONE ................................................... : ........................................................................ 1 

INTRODUCTION .......................................................................................... : ............................. 1 

1.0 Introduction .............................................................................................................................. 1 

1.1 Background of the Study .................................. · ....................................................................... 1 

1.2 Problem Statement ............... ................................................................................................. 2 

1.3 Objectives ofthe Study ............................................ : ............................................................... 2 

1.3.1 General Objectives ................................................................................................................. 2 

1.3.2 Specific Objectives ....... , ...................................... " .............................................................. 2 

1.4 Research questions ....... : ........................................................................................................... 3 

1.5. Scope ofthe study ...... : ............................................................................................................. 3 

1.6. Significance ofthe study ......... .' .. : ......... .................................................................................... 3 

1. 7 Methodology ............................................................................................................................ 4 

1.8 Literature review ..................... : ................................................................................................. ~ 

CI-IAPTER TWO ....... ........................................................................... .. ...................................... 7 

LEGAL FRAMEWORK USED IN REGULATION OF BANKING SECTOR IN 

UGANDA ....................................................................................................................................... 7 

2.1 The regulation of banking sector .............................................................................................. 7 . CHAPTER THREE .................................................................................................................... 18 

LEGAL CHALLENGES FACED BY CENTRAL BANK IN REGULATING BANKING 

SECTOR IN UGANDA ........................... · ................................................................................... 18 

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3. 1 Introduction .... ..................................................................................................... ~ ......... .......... 18 

3.2 Legal Challenges Faced in In Regulation of Banking Sector In Uganda .......................... : .... 19 . .' 

3 .2.1 Challenge of offering legal advice ....................................................................................... 19 

2.2.2 Challenges of duty of due diligence owed by the bank ........... ...... ....................... ... ............ 20 

3.4 Conclusion .............................................................................................................................. 33 

CI-IAPTER FOUR ........... ............................... .................... ......................................................... 34 

CAUSES OF COMMERCIAL BANK FAILURE IN UGANDA .......................................... 34 

4. 1 Loan 1nanagement ............................................ ....................................................................... 35 

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4.3. Macro economic circumstances ............................................................................................. 36 

4.4. Insider dealing ..................................................................................................................... 36 

4.5. Lending to high risk borrower ............................................................................................... 36 

4.6. Under capitalisation ............................................................................ , .................................. 36 

4.7. Liquidity suppmt and prudential regulation .......................................................................... 37 

4.8. Inadequate infrastructure in accounting and law ................................................................... 37 

4.9. Poor bank supervision and regulation .................................................................................. .38 

4.1 0. Government interference ..................................................................................................... 38 

4.2.1. Fraud and corruption .......................................................................................................... 38 

4.1.3. Political patronage .......................................... : ................................................................... 39 

4.1.4. Earnings .............................................................................................................................. 39 

4.1.5. Failure to honor the regulation and instruction ................................................................... 40 

CHAPTER FIVE ........................................................................................................................ 41 

SUMMARY OF FINDINGS, CONCLUSION AND TRECOMENDATION ....................... 41 

5.0 Introduction ............................................................................................................................. 41 

5.1 Research findings .................... , ............................................................................................... 41 

5.2Recomendations ................................................................................ : ...................................... 43 

5.2.3 Enacting a code of conduct ................................................................................................. 44 

5 .2.6 Enacting adquate law .................................................................... : ...................................... 44 

5 .2. 7 Focus on risk management strategy ..................................................................................... 45 

5.2.8 Consumer protection and fairness of contractual terms ....................................................... 46 

5 .2. 9 Banking Services Act ............................................................................... """ ..................... 46 

5 .2.1 0 Legislators should ask for consultations .................................... , ...................................... 46 

5.2.1.1 Guiding financial institutions .......................................................................................... 46 

5 .2.1.2 Amending the penal code ................................................................................................ 4 7 

5.3 Conclusion ............................................................................................................................. 4 7