the drought having abated, headline inflation has fallen by 2. 5 percentage points over the last five months to 4. 8 percent in october 2017, while annual core inflation was only 3. 5 percent in october 2017. the improving outlook for inflation allowed the bank of uganda to further lower the policy interest rate – the central bank rate – to 9. 5 percent in october. the current year is probably best characterised as a period of financial consolidation for the banking industry. at the end of 2016, one of the largest banks in uganda – crane bank – had been taken into the statutory management of the bou and the banking industry as a whole was struggling with high levels of non - performing loans and low profitability. we were able to resolve crane bank successfully, without any loss to its depositors, and without any contagion to the rest of the banking system. public confidence in the safety of depositors ’ funds has been maintained. i believe that this is testimony to both the underlying financial strength of the ugandan banking industry and the efficacy of our bank resolution framework. two aspects of this resolution framework are especially worthy of mention. first, the financial institutions act, 2004 mandates the bank regulator to undertake prompt regulatory interventions to stem the losses of failing banks before depositors ’ funds are eroded. second, the bou has successfully utilised purchase of assets and assumption of liabilities transactions to minimise the disruption to the depositors and other customers of failed banks. over the course of the first nine months of 2017, the financial soundness indicators of the banking system have improved. the non - performing loan to total loan ratio has fallen from 10. 5 percent in december 2016 to 7. 2 percent in september 2017 ; and in absolute terms, npls fell by 32 percent. over the same period, the total capital adequacy ratio of the banking system increased from 19. 8 percent to 23. 8 percent of its risk weighted assets. strong capital buffers are of particular importance in bolstering the resilience of banks to adverse shocks. as i noted earlier, 2017 has been a year of consolidation, especially in regard to bank lending, with gross loans and advances increasing by a mere 1. 8 percent in the year to september 2017. i hope that the downward trend in npls and the reduction in the policy interest rate will encourage banks to ease their lending policies and thereby enable an acceleration of credit growth in 2018. a crucial problem which needs to be addressed if banks are to

unfortunately that will also mean lower employment in the banking industry. page 11 of 14 as they adopt electronic banking technologies, key challenges for banks will be to ensure that these new technologies can deliver the same quality of, and access to, services for their customers as the more traditional technologies and that the risks entailed in electronic banking are fully understood and can be managed effectively. in particular, banks must ensure that their electronic systems can be safeguarded against cyber - attacks, both to protect the integrity of individual customer ’ s accounts and to prevent threats to the financial safety of the bank itself. the adoption of electronic banking has implications for bank regulation and supervision, which in uganda has traditionally focussed on banks ’ management of credit risk. page 12 of 14 in future, operational risks arising from electronic banking are likely to become of greater significance as potential threats to the financial soundness of banks and their ability to command the confidence of their customers. bank regulators need to strengthen their capacities for monitoring the security of banks ’ it systems. to conclude, i believe that the future of the banking industry in uganda is bright. in terms of productivity, the adoption of international best practises and its use of modern technology, banking is one of the leading industries in uganda. banking also operates in a macroeconomic and prudential regulatory environment, which provides scope for investment and innovation while, at the same time, safeguarding the interests of depositors and the safety and soundness of the financial system. page 13 of 14 consequently i am confident that banks will be able to meet successfully the challenges that they face, and in doing so, continue to contribute to the development of the ugandan economy. finally i would like to wish you all the best for the rest of this conference. thank you for listening to me. page 14 of 14