of uganda as a result of its insolvency. the governor ’ s decision to resolve uganda commercial bank by selling it to a reputable international bank, in the teeth of widespread scepticism and in some cases outright opposition, proved to be one of the most prescient ever taken in the history of banking in this country. ucb was sold to stanbic bank, a sale which preserved the nationwide branch network of ucb, and protected its deposits. since acquiring ucb, stanbic has been in the forefront of the dynamic expansion of the ugandan banking system which has occurred in the 2000s, which has included very rapid growth of bank lending to the private sector. the governor also spearheaded major legislative reforms to financial regulation which were essential to strengthen the legal framework governing the financial sector in uganda. the 2003 micro - finance deposit taking act brought, for the first time in uganda, deposit taking microfinance institutions under the regulatory aegis of the bank of uganda. in the following year, the financial institutions act was enacted, which upgraded banking legislation in uganda and incorporated important elements of international best practise, such as prompt corrective action provisions for resolving distressed banks. the success of financial regulation in uganda over the last decade is indisputable. despite the shocks emanating from the global financial crisis, uganda ’ s banking system has remained in a markedly robust financial condition, with average capital adequacy levels comfortably in excess of statutory minimum levels, low levels of non performing loans and impressive profitability. prof. tumusiime - mutebile was recently appointed to a third five year term as governor. the bank will face new challenges in the years ahead. the emergence of uganda as a “ frontier market ” will make effective financial regulation, including macro - prudential regulation, even more critical to the stability of our economy. we must upgrade our monetary policy framework to embrace inflation targeting. and we must prepare the bank for the transition to east african monetary union. we should not be afraid of these challenges, for we are led by a governor of unique vision, courage and wisdom. mr. governor, please accept this plaque from the board and staff of bank of uganda in recognition of your exemplary stewardship of this institution. you can count on our support. we wish success in your new term.

depreciation. finally, recently, the dollar has strengthened against the major currencies as a result of expectations that america will be the first among the industrialized countries to raise interest rates. financial sector the latest quarterly data available is for september 2014 and this indicates that the banking system is financially very sound and well capitalized. asset quality has improved. the nonperforming loan ratio has declined from 6. 2 percent of the loans in march 2014 to 5. 3 percent of the loans in september 2014. banks ’ profitability has reduced partly as a result of loan provisioning and a slight drop in the net interest margin. the banks ’ total regulatory capital position remains very strong at 22. 5 percent of risk weighted assets as at end of september 2014 which is almost double the statutory minimum of 12 percent. the banking systems ’ bis central bankers ’ speeches average return on assets and equity declined to 2. 2 percent and 13. 1 percent respectively in the year to september 2014 from 3. 1 percent and 18. 8 percent in the previous 12 months. private sector credit with regard to private sector credit growth, since the start of 2014, private sector credit has recovered with annual growth increasing to 13 percent as of end of september 2014. the building and construction sector, trade and household loans continued to account for the bulk of the ps credit. the three sectors together ( building and construction sector, trade and household ) accounted for over 55 % of banking systems ’ outstanding credit to the private sector since february 2014. annual growth of ps credit during 2014 / 15 is projected at 15 percent. bis central bankers ’ speeches