Bank of Uganda has authorized financial institutions to handle their customers for a 3rd restructure for credit facilities for customers who have been impacted by the Covid-19 pandemic.
In a circular to chief executives of Commercial banks, Credit facilities, Microfinance Deposit-taking Institutions Central Bank Governor Emmanuel Tumusiime Mutebile says:
“Reference is made to the Guidelines on Credit Relief and loan restructuring measures issued vied circular dated 14th April 2020 Ref: DGV 121. Particular attention is drawn to the General Provision Section 1(a) second sentence that states as follows; Any SFI, may on application to BoU, request for further restructuring(s) during the credit relief period. Since March 2021, BoU has received several applications from SFIs seeking BoU’s no objection to grant 3rd restructures to some of their customers, the Central bank says, adding that each individual institution is allowed to handle their customers for a 3rd restructure under their credit relief guidelines.
“After careful review of the processes, procedures and risks associated with reviewing and approving additional requests, Bank of Uganda has decided to grant delegated authority to individual Supervised Financial Institutions (SFIs) to handle their customers,” Mutebile states in the circular.
The Bank states that it accordingly amended General Provision Part 1(a) of the Credit Relief Guidelines issued on 14th April 2020 vied circular dated 14th April 2020 Ref: DGV 121 and subsequently extended in February 2021 as follows:
- The maximum numbers of allowable structures under the Credit Relief guidelines in the period between 1st April 2020 and 30th September 2021 is capped at three (03)
- Each SFIs shall, in accordance with its risk management policies or frameworks, review and approve or decline any application for 3rd restructure from its customers
- Any 3rd restructure approved by any SFIs must STRICTLY be in response to exceptional circumstances faced by a borrower. The decision to grant a 3rd restructure SHALL be informed by a forward looking prudential risk assessment and analysis of the benefiting borrower and granted to borrowers whose financial condition remains viable. As such, SFIs should prudently and proactively provision any borrowers who have benefited or will benefit from loan restructuring but whose financial condition remains depressed;
- The exceptional circumstances together with rationale supporting the grant of a third restructure by any SFI under the Credit Relief measures SHALL be properly documented, maintained and readily available for review by BOU.
“As part of its normal supervisory processes and activities, Bank of Uganda shall implement targeted and adhoc assessments on the efficacy of the Credit Relief Measures and compliance to the Credit Relief Measures by SFIs,” the Governor concludes.
In February this year, BoU announced an extension Credit Relief Measures for another six months, a move that was aimed at helping SFIs to continue restructuring loans and also provide loans to the commercial banks and financial institutions to lend out to the business community.
On April 06, 2020, BoU announced Credit Relief Measures to mitigate the economic impact of COVID-19 and safeguard Financial Stability and on April 14, 2020, issued Guidelines to Supervised Financial Institutions (SFIs) on how to implement the measures.