Emmanuel Tumusiime-Mutebile: Emerging issues in the banking
industry
Remarks by Mr Emmanuel Tumusiime-Mutebile, Governor of the Bank of Uganda, at the
Opening Ceremony of the Colloquium of Judges and Magistrates on "Emerging Issues in the
Banking Industry", Mbarara, 13 August 2015.
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My Lords, the Chief Justice and Deputy Chief Justice
My Lords, the Honourable Judges
Your Worships, the Magistrates
The Chairman and Members of the Uganda Bankers Association (UBA)
Ladies and Gentlemen,
It is a great pleasure and honour for me to take part in this important gathering which brings
together members of the Uganda Bankers' Association and colleagues from the judiciary to
discuss very pertinent issues on the banking and financial sector.
I am very much delighted and convinced that this forum provides a unique opportunity for your
Lordships and Worships together with the bankers to discuss and have a better understanding
of emerging issues and risks in pursuit of enhancing the soundness of the financial sector.
Ever since UBA came into being in 1981, it has continued to play an important role to articulate
the interests of the banking industry in Uganda by reaching out to all the key stakeholders in
society, including the government, the judiciary, the parliamentarians, the business community
and the general public. This forum therefore, is in line with UBA's strategic mission of improving
knowledge on the banking sector risks and building consensus for addressing challenges and
developing ideas for a better legislative environment and resolution of financial disputes which
by nature are common in the banking industry.
Over the last decade, the banking industry globally has witnessed a significant transformation
especially from the technological front. These changes have immensely reshaped the manner
and speed of financial services delivery as well as a menu of products and services offered by
financial services providers to customers. Uganda like most other countries has not been
spared by these developments owing to its interconnectedness to the broader financial system
through the payment system and competitive pressures for business which has often spurred
the need to innovate. At the same time, the risk profiles of business have also profoundly
changed and thus, while banks continue to harness the ensuing benefits from the innovations,
they must find ways of containing the array of risks associated with the developments to
safeguard the integrity of the banking sector.
In this address, I will attempt to highlight some of the emerging issues and risks which need to
be looked into; to ensure the stability of the financial sector. I will also briefly talk about the role
of Bank of Uganda in the areas of regulation and financial sector development.
• As alluded to earlier, innovations as well as the entry of new banks and regional
economic integration drive have combined to spur competition in the financial services
industry. Banks are continually embracing information technology to offer innovative
financial products. The increasing integration of the banking sector into the global
financial markets, through cross border banking and capital flows, has created or
heightened exposures to these new sources of risk. The evolution of technology has
made possible the issuance and innovation of numerous type of banking products
including the VISA, MasterCard, online Banking, Mobile money, Internet Banking and
e-commerce. All these forms of innovations facilitate modern banking and positively
influence our ways of living in many fields. The rollout of IT supported products and
services in the banking industry however, come with a concern on "security" and new
risks. Some of the common risks prevalent include cyber-related frauds which can
arise from hacking of IT systems and/or manipulation of IT databases.
• Relatedly, the efficiency gains from technology have changed the nature of the
execution of financial and economic crimes as well as financing of terrorism providing
a faster and diversified means by utilizing IT infrastructure. At present the need to
combat Money Laundering and Financing of Terrorism is increasingly changing the
role and mandate of the Central Bank which is required to honour various Freeze
Order requests by police and requests from International stakeholders like the US
Embassy and local stakeholders like the Financial Intelligence Authority. Fortunately
the BoU is represented in the Board of the Financial Intelligence Authority and has a
close collaboration on addressing the common issues of concern.
Inadequate training of Mobile Money Agents has also exposed some agents to
fraudsters although quantifying the actual losses is not easy as the data on such
frauds is not readily available at Bank of Uganda.
• Broadly, the nature of IT risks calls for unique skills for interrogations of IT systems to
support investigations on cyber-related fraudulent activities in a bid to stemming
crimes of IT nature.
• What then is the role of the central bank in addressing the emerging risks in the
financial sector? The primary responsibility of the BoU is to initiate the drafting of the
required regulations and to enforce the same when enacted. Regulation has two
objectives. The first objective is to protect the interests of depositors and this is done
by imposing prudential requirements on banks, under the framework of the Financial
Institutions Act (FIA), 2004. The second objective is to preserve financial stability as
a means of preventing financial crises and this entails ensuring that banks conduct
their operations in a manner that is not detrimental to the stability of the banking
industry.
• In addition to the above, BoU has embarked on the process of introducing additional
regulatory measures on payment systems which will among others lead to proper
regulation of mobile money operations. The advances in technology demand that BoU
and other regulators world-wide continually re-examine their financial regulations in
light of the emerging risks while at the same time not stifling innovations. Financial
sector regulators therefore must always put the risks and "security" concerns as a key
priority and align these concerns with standard setting to promote the advancement
of banking services.
I must also emphasize that in stemming financial sector vices and risks, members of the
judiciary play a very important role especially in the timely resolution of disputes not only of
cyber-related/IT nature but also disputes that arise from the traditional banking activities such
as those that arise from foreclosure of collateral belonging to bank customers who have
defaulted on their loans which in the past have tended to be quite lengthy and a challenge to
the lending institutions. We all know that losses of any nature including those arising from
frauds negatively impact the capital of banks which can endanger the safety of depositors'
funds. I therefore believe that this workshop will build consensus on how the bankers and
members of the judiciary can improve the timelines of resolution of financial crimes and
disputes and generate invaluable ideas to foster the soundness of the banking industry.
With those few remarks, I wish to declare this workshop officially opened.
Thank you for your attention.