bank are transferred to another bank ; a financially assisted merger of the failing bank with another bank ; or the provision of financial assistance to the failing bank to avert its failure as happens during statutory takeover by the regulator. page 6 of 8 mindful of the risk that deposit insurance would stoke moral hazard through encouraging banks to take greater risks, i want to assure you that the bou is committed to effective supervision of bank risk - taking, with particular attention to the quality and types of assets that banks acquire as well as the amount of capital that banks hold relative to the risks they take. in addition to the risk - based micro - prudential supervision, the bou also undertakes macroprudential regulation and supervision to ensure the stability of the entire system, including stress testing to ensure that the sector is resilient to various shocks. effective deposit insurance can contribute to financial stability, only with strong bank regulation and supervision in place. deposit insurance is no substitute for effective regulation and supervision of banks. through a risk - based supervision framework, the bou is committed to spotting problems well before insolvency occurs and compelling banks to take prompt and preemptive corrective action. as i come to the end of my remarks, i must stress the need for the nascent deposit protection fund ( dpf ) of uganda as an autonomous institution to prove its credibility and fitness for purpose before it gets tested in a period of difficulty. page 7 of 8 the dpf must be well funded, capably staffed, and should maintain the support of the central bank as well as that of the government as partners in ensuring the stability of the financial system. the dpf must also maintain strong links with regional and international peers so as to learn from the diversity of experiences and to maintain best practices. i look forward to working with the dfp as it plays its role within the africa regional committee of the international association of deposit insurers by contributing to the stability of financial systems through international cooperation and maintaining such a virtuous network as has gathered here for this conference. it is now my distinct privilege to invite the honourable minister of finance to address this audience. i thank you all for listening to me. page 8 of 8

the need for effective deposit insurance was exposed during the resolution of several local banks that failed during the late 1990s and early 2000s. indeed, the bank of uganda ( bou ) has recently been the subject of a parliamentary probe seeking final closure of the numerous issues and contested claims that arose out of the associated receivership and liquidation processes. notably, the depositors of those failed banks were fully compensated, for the most part, using taxpayers ’ funds as the government sought to preserve public confidence in the banking system. needless to say that such implicit deposit insurance by the government imposed an unanticipated financial burden on the limited fiscal space. page 4 of 8 seeking to foster financial sector soundness, several reforms were undertaken in the banking system. these reforms included but were not limited to : tightening banking laws and regulations designed to constrain undue bank risk - taking and inappropriate insider dealings ; upgrading bank supervision and examination systems ; providing liquidity through the central bank to prevent bank illiquidity problems from turning into insolvencies ; and intervening to resolve failing banks. of specific relevance was the introduction of a deposit insurance scheme that was initially operated within the bou. an effective deposit insurance system is expected to yield faster, smoother, and more predictable resolutions of failing banks, not least because it follows predetermined “ rules of the game, ” rather than being discretionary and ad hoc. and it stands to reason to say that a more rules - based deposit insurance scheme operates best when it is autonomous. therefore, in 2016 the financial institutions act 2004 was amended to provide for the establishment of an autonomous deposit protection fund of uganda, among other reforms. page 5 of 8 another vital reform, worth highlighting here, is the recent increase of the deposit insurance threshold to ush 10 million from only ush 3 million previously. the higher threshold is likely to enhance public confidence and encourage greater customer deposits, thereby expanding the funds available for financial intermediation by the banking sector. larger pools of deposits would reduce the cost of loanable funds for banks, spur credit expansion, and ultimately support faster economic growth. at this point, it is necessary to address any concerns about the safety of the deposits that exceed the insurance threshold of ush 10 million. the protection of large uninsured depositors of failing banks, will continue to take place through various forms including : a purchase and assumption transaction, in which all of the deposits ( insured and uninsured alike ) of the failing