## EXECUTIVE SUMMARY ## Source details **Canonical URL:** [EXECUTIVE SUMMARY](https://www.imf.org/-/media/files/publications/cr/2023/english/1ugaea2023002.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2023/english/1ugaea2023002.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2023/english/1ugaea2023002.pdf.json) --- ### Overview - The Bank of Uganda (BOU) is implementing transparency practices broadly aligned with the good practices for central banks. - BOU initiatives: - comprehensive communication strategy; - broad use of tools underpinning commitment to transparency and accountability for the price stability mandate. - BOU seeks to improve public accountability and intends to use the results of the CBTC review to further improve communications and transparency practices. ### Legal framework, governance, and accessibility - Findings: - Overall legal framework and governance arrangements are disclosed but could be more easily accessible. - BOU has embarked on legal reform of the Bank of Uganda Act (the BOU Act) intended to: - bring it into conformity with the Constitution; - align the Act with good practices of other central banks; - further enhance transparency and address weaknesses in legal structure, mandate, autonomy, and governance arrangements. - Recommendations (selected): - Assemble and make easily accessible all relevant information on BOU’s legal framework, mandate, autonomy (including rationale), and roles and composition of decision-making bodies on the website; explain inconsistencies and disclose related legislation. - Make Byelaws more easily accessible (e.g., include under “Acts & Regulations”). - Pending BOU Act amendments, streamline objective and functions on website and Annual Report with BOU Act and Constitution. ### Monetary policy transparency and operations - Findings: - Detailed description of the monetary policy framework publicly available and conveyed in an understandable manner. - Inflation targeting lite regime adopted in July 2011; primary policy objective: maintain annual core inflation at 5 percent over the medium run. - Operational target: the 7-day interbank rate; CBR set by MPC with a corridor of ±2 percentage points. - Monetary Policy Statement (MPS) and Monetary Policy Report (MPR) published regularly; MPR published about 2 weeks after the statement. - MPC meetings: every two months (six times a year); decisions taken on a consensus basis; minutes are not published. - Daily publication of outcomes of monetary policy operations together with liquidity conditions and market activity; outstanding aggregate volumes are not publicly available. - Areas for improvement: - Disclose MPC deliberations and publish MPC minutes. - Publish characteristics of monetary instruments (maturity, interest rate, method, collateral, outstanding volume, etc.). - Reiterate that there is a band around the point inflation target (communications could reiterate a ±3 percentage points band around the point target). - Publish the forecasting model used for policy analysis (BOU has expressed intention to publish the model). ### Macroprudential policy and financial stability - Findings: - BOU has improved macroprudential policies and analytical framework; publishes Annual Financial Stability Report (FSR) and Quarterly Financial Stability Review (QFSR). - Legal mandate for macroprudential policy not explicit; Section 4 of the BOU Act and sections 27 and 131 of the FIA "implicitly lays the foundation for a macroprudential policy function." - Interim draft macroprudential policy framework has not been formally approved by the Board and is not published. - No process of post-evaluation of the impact of policy decisions on relevant macroprudential intermediate targets. - Disclosure gaps: countercyclical capital buffer methodology (currently "set at present at 0%") not disclosed; framework for countercyclical capital buffer not disclosed; DSIB buffer levels not publicly disclosed; DSIB list released via FSR rather than immediately after circulars. - Recommendations: - Disclose the macroprudential policy framework (including objectives mapped to policy instruments) and publish policy decisions in a timely and uniform manner. - Aggregate relevant information under a macroprudential section on the website, including meeting calendar and list of policy measures in effect & links to circulars. - Publish minutes for relevant financial stability committees and ex-post evaluations of policy impacts. ### Foreign exchange policy, interventions, and reserves management - Findings: - Role of the floating exchange rate regime clearly disclosed and compatible with inflation targeting. - FX interventions objective: reduce excessive volatility that could affect inflationary expectations and to build reserves. - FX transactions executed in the Interbank Foreign Exchange Market (IFEM) through Refinitiv; aggregate data, motivations and outcomes published in bi-monthly MPRs. - BOU publishes UGX exchange rate against USD three times a day and against GBP, EUR, KES, TZS, and ZAR once a day. - Reserves: gross external reserves, including the SDR allocation, increased to $4.4 billion (4.2 months of imports) in December 2021. - Annual report FY 2020/21: “BOU purchased a total of USD 723.5 million, of which USD 552 million was for reserve build up. The remaining USD 171.5 million went towards interventions to stem volatility in the IFEM, as well as towards targeted purchases.” - Areas for improvement: - Publish terms of reference of committees and sub-committees involved (notably Financial Market Operations Sub-Committee (FMOS)). - FMOS should clarify choice of instruments used in the foreign exchange market and define "excessive exchange rate volatility." - Publish a dedicated Foreign Reserves report and a dedicated website section for Foreign Exchange Reserves Management, including governance, oversight, ex-post impact analysis and reasons for actions taken. - Improve disclosure on liabilities, short-term drains, and commitments on a predefined schedule with a lag. ### Emergency Liquidity Assistance (ELA) and LOLR - Findings: - Legal basis for ELA laid out in the BOU Act; April 2021 BOU Board ratified the Emergency Liquidity Assistance (ELA) Framework for Supervised Financial Institutions. - Operational ELA framework drafted but not yet published at the time of review; CLAP (COVID-19 Liquidity Assistance Program) operated as an ELA-like facility and data on use published in QFSR. - Disclosure practice: ELA provision reported after immediate risks subside; operational details and haircuts withheld for confidentiality. - Recommendation: - Following approval, publish the new Operational ELA framework on the BOU website to enhance transparency, but do not publish haircuts for specific types of collateral (haircuts should remain confidential). ### Financial integrity (AML/CFT) and internal controls - Findings: - BOU responsible for AML/CFT supervision of banks, MDIs, forex bureaus, money remittances, licensed payment service providers and payment system operators (including MMSPs). - Mutual evaluation in 2016 judged Uganda to have an overall low level of effectiveness. - BOU overhauling AML/CFT supervisory approach; establishment of a dedicated AML/CFT Unit planned to be finalized in June 2022; dedicated AML/CFT team formed end of 2021 (four officers out of targeted six). - BOU does not disclose policies and processes related to AML/CFT supervision on the website; AML Regulations 2015 and Anti-Terrorism Act adoption initially not available on website (later actions indicate upload). - Internal AML/CFT policy drafted and pending Board approval; internal AML Manual from 2015 exists but is not publicly available. - Recommendations: - Once reforms are implemented, disclose internal AML/CFT framework and internal controls with appropriate confidentiality and safeguards. - Publish AML/CFT supervisory processes, relevant legal instruments, and overview of supervisory activities in annual and other reports. - Publish resources dedicated to internal AML/CFT controls (e.g., organizational chart). ### Communications, outreach, and confidentiality - Findings: - BOU established a Media Center and expanded multi-channel communications: blogs, podcasts, social media, community events, public education videos, audio recordings, posters, brochures, headlines/news items; BOU YouTube channel has over 1,000 subscribers. - Communications policy and strategy exist (Communications Policy 2020; Communications Strategy FY 2020-21 to FY 2024-25) but are treated as internal and not publicly disclosed. - There is no compiled public confidentiality policy or continuum/classification for disclosure vs confidentiality. - Recommendations: - Release excerpts from communications policy and broader BOU strategic plan for public consumption (non-sensitive excerpts). - Develop and publish a confidentiality policy that documents reasons for disclosure/non-disclosure and provides a standard approach across a continuum of disclosure versus confidentiality. - Publish a data classification policy and align with the Information security policy and forthcoming information security regulations. ### Anti-corruption, Code of Conduct, and accountability - Findings: - Anti-corruption legal framework (Anti-Corruption Act, Leadership Act, Inspectorate of Government Act, Penal Code) applies to BOU but internal Administrative Manual and Board Charter (including Code of Conduct) are not publicly disclosed. - Administrative Manual covers duties, disclosure of personal interests, gift acceptance, anti-fraud, whistleblowing and compliance; Board Charter contains Code of Conduct for Board members. - Financial statements: BOU publishes a complete set of independently audited financial statements in accordance with International Financial Reporting Standards (IFRS) and accompanied by Auditor General’s report referring to International Standards on Auditing. - Recommendations: - Consider publishing the Internal Audit Charter or summary, AGCB terms of reference, and an overview of internal audit activities and AGCB key activities during the financial year. - Consider disclosing the existence and main elements of the Administrative Manual and Code of Conduct or summaries, including information on breaches and outcomes where appropriate. ### Consumer protection and payment systems - Findings: - National Payment Systems Act 2020 (available on BOU website) provides explicit legal basis to mandate payment service providers comply with consumer protection standards. - BOU developed consumer protection guidelines, a framework for financial literacy and financial consumer protection, and a complaint mechanism (Financial Consumer Empowerment Mechanism — FCEM). - Annual report 2021: Complaints received totaled 341 for year ending June 2021; 322 resolved and 19 pending; complaints down from 493 previous year; nearly 37 percent of complaints for calendar year 2020 related to ‘mobile money/mobile banking’. - Recommendations: - Disclose BOU policy, operations, and outcomes regarding consumer protection following consumer protection sub-principles; upgrade consumer protection guidelines into regulations. ### Financial Sector Regulators Forum (FSRF) and inter-agency coordination - Findings: - FSRF (also FSSF) coordinates actions of institutions with mandates over financial sector regulation and supervision; MOU exists among members but is not a public document. - Recommendation: disclose the MOU among FSRF members and provide periodic updates on FSRF work via press releases or updates, in the Supervision Report or Financial Stability Report. - Action plan: BOU adopted an action plan to implement the fifteen Key Recommendations and expects complete execution by December 2023 (selected implementation dates and status listed in action plan). ### Scope, methodology, and timing of the CBTC review - Scope: covered all CBTC principles for areas defined as mandates within the Bank of Uganda Act; areas outside the pilot were denoted “Not Applicable.” - Objective: help BOU evaluate transparency practices, identify strengths and areas for improvement, and serve as input to its five-year strategic plan. - Approach and methodology: - Desk review and in-depth discussions with BOU and stakeholders. - CBTC workshop for BOU conducted between February 18-22, 2022. - Mission took place during March 30–April 12, 2022. - Review based on state of transparency practices as of mission dates; initiatives implemented after review date not considered. - Note: In accordance with the CBTC, the review does not assign ratings to adherence to CBTC principles. *Source: EXECUTIVE SUMMARY and excerpts from 1ugaea2023002* ### EXECUTIVE SUMMARY __________________________________________________________________________ 5 ### EXECUTIVE SUMMARY ### Overview - The Bank of Uganda (BOU) is implementing transparency practices broadly aligned with the good practices for central banks. - The BOU has initiatives on a comprehensive communication strategy and broad use of tools underpinning commitment to transparency and accountability for the price stability mandate. - The BOU seeks to improve public accountability and intends to use the results of the CBTC review to further improve its communications and transparency practices. ### Legal framework, governance, and accessibility - The overall legal framework and governance arrangements of the BOU are disclosed in a transparent manner but could be made more easily accessible. - The BOU has embarked on a legal reform of the Bank of Uganda Act (the BOU Act) intended to: - bring it into conformity with the Constitution; - align the Act with good practices of other central banks; - further enhance transparency and address weaknesses in legal structure, mandate, autonomy, and governance arrangements. ### Monetary policy transparency - A detailed description of the monetary policy framework is publicly available on the website and conveyed in an understandable manner. - The BOU explains the reaction function of monetary policy by regularly clarifying the relationship between objectives, instruments, and macroeconomic conditions. - The Monetary Policy Statement (MPS) and the Monetary Policy Report (MPR) are published regularly and in a timely manner. - Area for improvement: decision-making processes and policy deliberations of the Monetary Policy Committee (MPC), including publication of MPC minutes. ### Macroprudential policy and financial stability - The BOU has improved macroprudential policies and the analytical framework aimed at mitigating systemic risks. - The draft macroprudential policy framework has not been formally approved by the Board and, consequently, is not published. - There is no process of post evaluation of the impact of policy decisions on the relevant macroprudential intermediate target. - Recommendation: disclose the macroprudential policy framework (including objectives mapped to policy instruments) and publish policy decisions in a timely and uniform manner. ### Foreign exchange policy and operations - The role of the floating exchange rate regime is clearly disclosed; several publications explain the objectives of the FX management framework. - Transparency would benefit from publishing terms of reference of committees and sub-committees involved (notably the Financial Market Operations Sub-Committee (FMOS)). - FMOS should clarify the choice of instruments used in the foreign exchange market and provide more context for what is meant by excessive exchange rate volatility. ### Emergency Liquidity Assistance (ELA) - The new BOU ELA operational framework should be published on the BOU website once approved. - Recommendation: publish the comprehensive Operational ELA framework including rules and parameters; however, haircuts or other risk mitigation measures applied for collateral should remain confidential to mitigate moral hazard. ### Anti-corruption, AML/CFT, and internal controls - The anti-corruption legal framework in Uganda applies to the BOU, but no public details on its application and enforcement with respect to the BOU are disclosed. - Internal administrative rules and an internal Code of Conduct applicable to Board members exist but are not disclosed publicly. - The BOU is responsible for AML/CFT supervision of the banking sector and several nonbanking entities, but: - external AML/CFT supervisory activities of the BOU and its internal AML/CFT controls are not disclosed to the public; - a dedicated AML/CFT team has only recently been established; - no information is publicly available on the BOU’s supervisory activities, policies, and processes in AML/CFT. - Expectation: Uganda will start providing more information on its AML/CFT approach once pending reforms are fully implemented. ### Communications, outreach, and confidentiality - The BOU has established a media center to enhance communication and outreach. - The communications policy and strategy map stakeholder positions and set initiatives to improve communications to integrate into broader BOU efforts to improve policy effectiveness. - The BOU followed through on elements of the 2017-22 strategy and endeavors to further strengthen public accountability. - Recommendation: release excerpts from communications policy and the broader BOU strategic plan for public consumption. - Recommendation: develop and publish a confidentiality policy that documents reasons for disclosure/non-disclosure and provides a standard approach across a continuum of disclosure versus confidentiality. ### Assessment against CBTC and disclosure practices - The mission found that BOU’s transparency practices largely conform to various dimensions of transparency; information is disseminated through several channels. - Timeliness of disclosures is consistent with the periodicity in published communication standards. - Relative to criteria in the CBTC, there is room to enhance the quality of transparency in important areas supporting institutional accountability (see Table 1 and Key Recommendations). ### Key recommendations (selected highlights) - Assemble and make easily accessible all relevant information on the BOU’s legal framework, mandate, autonomy (including rationale), and roles and composition of decision-making bodies on the website; explain inconsistencies and disclose related legislation. - Disclose on risk management: - a general risk statement mapping attitudes toward risks to the BOU’s mandate; - an overview of responsibilities of the risk management function; - the overall risk strategy of the BOU. - Improve clarity on accountability arrangements by publishing high-level overview of the accountability framework and considering publication of charters of: - the internal audit function; and - the Audit and Governance Committee of the Board (AGCB), including main activities during the financial year. - Enhance communications policy disclosure: make accessible excerpts from communications policy and broader BOU strategy. - Develop and publish a confidentiality policy with a clear continuum and bright line rules for disclosure versus confidentiality. - Publish MPC deliberations and characteristics of monetary instruments (maturity, interest rate, method, collateral, outstanding volume, etc.) and reiterate that there is a band around the point inflation target. - Clarify the role and choice of instruments and decision-making processes consistent with exchange rate and monetary policy regime; publish FMOS terms of reference and rationale for FX interventions. - Disclose the broad context, governance, and oversight framework of Foreign Exchange Reserves Management in a dedicated website section. - Improve transparency around FX administration and cross-border flows by disclosing temporary measures procedures and clarifying that Uganda has no capital controls; disclose procedures to obtain licenses for banks, forex bureaus, and money remittance and required forms. *Source: EXECUTIVE SUMMARY, 1ugaea2023002* ### 10. Following approval, the BOU ELA operational framework should be published on the ### 1ugaea2023002 - 10. Following approval, the BOU ELA operational framework should be published on the ### Emergency Liquidity Assistance (ELA) operational framework - Following approval, publish the new Operational ELA framework on the BOU website to enhance transparency by providing a comprehensive framework that includes rules and parameters expected in an ELA framework, in particular rules regarding supervision and disclosure policy. - Do not publish haircuts for specific types of collateral; publishing haircuts could create problematic implications, including giving undue incentive for banks to optimize on this information. ### Macroprudential policy transparency - Disclose the macroprudential policy framework and objectives mapped to policy instruments to improve transparency. - Aggregate relevant information under a macroprudential section on the website, including clarity on objectives mapped with relevant instruments. ### AML/CFT and anti-corruption disclosures - Consider disclosure of the internal AML/CFT framework and internal controls with appropriate confidentiality and safeguards. - Provide information on applicable anti-corruption legal instruments and clarify how these apply as relevant teams and policies are set up. - Publish information regarding anti-corruption measures and expected standards of personal and professional behavior applicable to the BOU’s decision-makers, staff, and agents, including the Code of Conduct and information regarding their application and review. - Publish a broad overview of the Bank’s internal AML/CFT controls; publication would be beneficial. ### AML/CFT supervisory processes and legal instruments - Disclose information about AML/CFT supervisory processes and related procedures of the BOU. - Publish relevant legal instruments on the BOU’s website and provide an overview of AML/CFT supervisory activities in the annual reports and/or other publications. ### Consumer protection - Disclose BOU policy, operations, and outcomes regarding consumer protection, following consumer protection sub-principles. - Note: The National Payment Systems Act 2020 (available on the BOU website) provides an explicit legal basis to mandate payment service providers comply with consumer protection standards. - The BOU has developed consumer protection guidelines, a framework for financial literacy and financial consumer protection, and a complaint mechanism for consumers to file complaints regarding treatment by financial institutions. ### Financial Sector Regulators Forum (FSRF) - Increase disclosure of the FSRF’s overall efforts. - Disclose the MOU among the FSRF members and provide periodic updates on FSRF work via press releases or updates, in the Supervision Report or Financial Stability Report. ### Scope and objective of the CBTC review - The mission conducted a Central Bank Transparency Code (CBTC) review at the request of the Bank of Uganda (BOU); this was the fourth under the pilot CBTC review program. - Scope: covered all CBTC principles for areas defined as mandates within the Bank of Uganda Act, excluding areas outside the pilot (e.g., micro-prudential supervision and resolution, and financial market infrastructure) which were denoted “Not Applicable.” - Objective: help the BOU evaluate transparency practices, identify strengths and areas for improvement, and serve as input to its five-year strategic plan. - The review maps BOU’s transparency choices against CBTC best practices covering transparency in: (i) governance; (ii) policies; (iii) operations; (iv) outcomes; and (v) official relations. ### Approach and methodology - Approach: desk review and in-depth discussions with BOU and key stakeholders. - CBTC workshop for BOU conducted between February 18-22, 2022, to explain CBTC considerations and principles. - Preliminary desk review used publicly available information and the self-review questionnaire provided by BOU prior to the mission. - Stakeholder meetings included public and private-sector representatives, academia, think tanks, and journalists; meetings were coordinated by BOU though BOU staff did not attend such stakeholder meetings. - Review conducted principle-by-principle, considering means, timeliness, periodicity, and quality of disclosure; stakeholder views were taken into account. ### Background and macroeconomic context - Pandemic impact: Economic activity came to a halt in FY2019-20 following collapse in external demand and stringent lockdown measures. - Policy response: increased fiscal support (using concessional financing), easing the policy rate to 6.5 percent (the lowest since adopting inflation targeting), extraordinary liquidity support and credit relief measures, and support for vulnerable populations. - Recovery: Economic activity gradually recovering with growth in FY2021 at 3.4 percent, about half of pre-pandemic levels. - External sector: current account deficit deteriorated to 10.2 percent of GDP driven by broad-based increases in imports and weak tourism. - Reserves and investors: gross external reserves, including the SDR allocation, increased to $4.4 billion (4.2 months of imports) in December 2021; off-shore investors’ holdings of government bonds showed strong appetite despite some outflows. - Legal reform: BOU legal reform expected to be approved in 2022 to align the Bank of Uganda Act with the Constitution and good practice on lender of last resort role, financial autonomy, and governance; addresses recommendations from the 2021 Safeguards Assessment. - Monetary framework: inflation targeting adopted in July 2011; core inflation consistently remained close to the lower end of the 5 percent medium-term inflation target. ### Main findings — Pillar I: Transparency in Governance - Legal structure, mandate, and decision-making: - Mandate and legal structure are disclosed, but information on the BOU’s legal protection is not easily accessible. - Pending enactment of amendments, website explanations could include: (i) general legal framework (Constitution and BOU Act); (ii) legal nature and legal protection applicable to the BOU; and (iii) present objectives and functions, clarifying mandate for public understanding. - Institutional autonomy: - Institutional autonomy is enshrined in the Constitution, but transparency on autonomy could be strengthened by disclosing: (i) explanation of constitutional supremacy; (ii) role of the Minister under the BOU Act and relationship between BOU and the Minister/MOFPED; and (iii) mechanisms ensuring security of tenure of decision-making bodies and rationale. - Organizational structure and board functions: - Composition of Board disclosed, but neither the BOU Act nor the website provide details for the role of the Governor or of Management Committees and their composition. - Website discloses composition of Board Committees, but not their functions. - Recommendation: include organizational structure and allocation of responsibilities on a dedicated, easily accessible web page; regularly update with current Board members and executives. ### Risk management and accountability framework - Risk disclosures: - Current disclosures include high-level overviews of key risks, developments, risk governance arrangements, and risk management process. - Publications lack an institutional view of the bank’s risk management framework: risk statement mainly focused on foreign reserves management and risk strategy disclosed only for credit risk. - Recommendations: publish (i) a general risk statement mapping key risks to mandate and bank’s tolerance; and (ii) the overall strategy to manage these risks. - Expand disclosure of risk governance structure to overview role and key responsibilities of risk management function. - Oversight and internal audit: - Legal framework does not provide for AGCB acting as an independent oversight body in practice nor the internal audit function, despite internal audit presence for many years. - Ongoing legal reform expected to introduce AGCB and internal audit accountability arrangements to the BOU Act. - Short-term disclosures: publish AGCB’s oversight role and responsibilities, and an overview of internal audit arrangements including role, reporting lines, and criteria for appointment of its head; consider publishing charters and main activities in reporting periods. - Financial statements: - BOU publishes a complete set of independently audited financial statements as part of the annual report, prepared in accordance with International Financial Reporting Standards (IFRS) and accompanied by the Auditor General’s report referencing International Standards on Auditing. - The BOU Act currently does not provide for applicable accounting and auditing standards nor publication of the audited financial statements. - Human capital governance: - Annual report provides generic information on staff composition, recruitment, and development; website describes recruitment campaigns and internship program. - No explicit references to diversity and inclusion or to leadership and succession planning. - Recommendation: improve disclosures on diversity, inclusion, leadership, succession planning, and applicable HR policies. ### Anti-corruption legal framework and Code of Conduct - Anti-corruption legal framework: - The Anti-Corruption Act, the Leadership Act, the Inspectorate of Government Act, and the Penal Code provide the anti-corruption legal framework in Uganda; these acts are available online though not on the BOU website. - The Anti-Corruption Act is applicable to all public bodies and governmental agencies; the Leadership Act requires annual declaration of income, assets, and liabilities. - The BOU’s internal Administrative Manual (AM) makes clear the anti-corruption legal framework applies to BOU decision-makers, staff, and agents. - Recommendation: draw references to these acts to ensure visibility and avoid uncertainty regarding applicability and enforcement. - Code of Conduct and expected behavior: - BOU rules on expected standards of behavior are set out in internal documents not disclosed to the public (Administrative Manual and Board Charter). - AM covers duties, disclosure of personal interests, acceptance of gifts, prevention of fraud, whistleblowing, compliance framework; disciplinary investigations handled by Management Disciplinary Committee. - Board Charter contains COC rules for Board members, alternates, and accompanying staff; oversight by Chairman of the Board and Board Secretary. - Recommendation: consider disclosing relevant rules and publishing the COC, including information regarding breaches and outcomes. ### Communications and confidentiality - Disclosure vs confidentiality: - Communication and confidentiality principles are complementary and mutually exclusive; some information is free to be disclosed while other information may be confidential requiring redaction or refusal. - BOU Act was last amended during the 1990s; disclosure and confidentiality provisions need reconsideration in light of the Access to Information Act (AIA) and evolution in central bank transparency over the past 25 years. - Communications enhancements: - BOU established a media center and enhanced communication and outreach to reduce uncertainty and improve policy effectiveness. - Channels and materials include blogs, podcasts, social media, community events, public education videos, audio recordings, posters and brochures, headlines/news items, and a list of partner agencies. - Boxed details: the BOU’s 2017 to 2022 bank-wide strategy prioritized communicating monetary policy and activities clearly and developing a diversity of communication channels. - Media Center functions include public education videos (monetary policy statement releases and post-statements, speeches, and testimony before Parliament) — BOU YouTube channel currently has over 1,000 subscribers — audio recordings explaining topics such as identification of genuine currency banknotes; posters and brochures on electronic funds transfer, RTGS, deposit protection fund, agricultural credit facility, credit reference services, and financial stability; headlines/news items with contact information for head of media relations and director of communications; and a list of counterpart central banks for regional coordination. *INTERNATIONAL MONETARY FUND* ### Box 1. The BOU’s Ongoing Enhancements to the Communications Strategy and Outreach ### Box 1. The BOU’s Ongoing Enhancements to the Communications Strategy and Outreach (concluded) ### Communications strategy and outreach initiatives - Follow-up to implementation of BOU’s 2017 to 2022 bank-wide strategy as it winds down; an internal communications-specific strategy developed for 2020/2021 to 2024/2025. - Ongoing external communications initiatives: - Strengthen monetary policy communication and its broader impact on macroeconomic policy. - Enhance financial stability communication. - Strengthen financial sector developments communication. - Enhance the BOU’s communications capacity by conducting targeted capacity building for communications staff through specialized training and development programs. - Improve the BOU’s crisis communications management. - Improve BOU’s corporate image through branding. - Strengthen BOU’s relationship with the media. ### Organizational disclosure and confidentiality - Communication organizational structure details disclosed (organization chart showing location of the director of communications and contact information on website), but the communications policy and strategy documents are not publicly provided. - The BOU lacks a compiled policy on confidentiality, including the reasons for confidentiality conclusions. - Recommendation: develop a confidentiality policy based on past requests, provide a continuum of disclosure versus confidentiality with a bright line rule, and publish confidentiality policies to improve stakeholder clarity. ### Monetary policy transparency and operations - The inflation targeting lite regime adopted in July 2011 is described in detail in publicly available outlets. - The BOU clarifies the reaction function of monetary policy, relating objectives, instruments, and macroeconomic conditions via the Monetary Policy Statement (MPS) and the Monetary Policy Report (MPR). - The BOU publishes macroeconomic forecasts and scenario analysis; the models used are not publicly available. - The composition and deliberations of the Monetary Policy Committee (MPC) are not disclosed. - MPC meetings: every two months (six times a year), or more frequently should the need arise. - Policy decisions: announced after MPC meetings through official statements on the website and other media channels; rationale included in the statement; Monetary Policy Report published two weeks after the statement. - MPC decisions are taken on a consensus basis of all members; minutes are not published. - Monetary operational framework: operational target and toolkit instruments listed on website; daily publication of outcomes of monetary policy operations together with liquidity conditions and market activity. - Transparency varies by instrument: - Comprehensive prospectuses available for Lombard and rediscount windows and term deposits. - Information not located on the website for other key tools such as repo and reverse repo contracts. - Details about the reserve requirement are scant; role and relative parameters are not disclosed in the context of monetary policy communication. - Assessment of outcomes: Annual Report (Article 49 in the BOU Act) shared with Government and Parliament, multiple outlets (MPR, MPS, simplified MPS) assess price stability and risks; daily reports show amounts, rates, and maturity profile for each operation but outstanding aggregate volumes are not publicly available. ### Foreign exchange and reserves management - The BOU clearly discloses the role of the floating exchange rate regime and its compatibility with the inflation-targeting regime. - FX interventions objective: reduce excessive volatility that could affect inflationary expectations through discretionary and targeted interventions; FX purchases may be carried out to build reserves. Recommendation: BOU could define "excessive exchange rate volatility." - Modus operandi and ex-post reports: FX transactions executed in the Interbank Foreign Exchange Market (IFEM) through the electronic platform Refinitiv; aggregate data, motivations and outcomes for past interventions published in the bi-monthly policy report; data on reserve build up purchases are published. - Counterparties must comply with the BOU market code of conduct and the FX Global code. - Reserves management: core elements disclosed in BOU Act and Annual Report (eligible asset classes, risks considered); frequent disclosures via quarterly report and annual financial statements. - Recommendation: publish a dedicated Foreign Reserves report with more disclosure on practices, decisions, oversight reporting framework, ex-post impact analysis of investments and risks, and reasons for actions taken. - FX administration: responsibility emanates from regulatory provisions approved in Parliament; BOU is not structured to oversee, regulate, or implement cross-border financial flow measures. Uganda’s position: - Open capital account; no restrictions to current account transactions. - Under the Foreign Exchange Act of 2004, no recent policy disclosures on regulations or imposition of exchange controls relevant for CBT concerning regulation of cross-border financial flows, transactions in foreign currencies within the country, transactions in domestic currency between residents and non-residents, and the rate at which purchases and sales of foreign exchange may take place. - Disclosure of allowable FX activities and requirements for licensing of entities authorized to execute FX are assessable via the BOU website. ### Financial stability and macroprudential policies - Legal mandate: BOU does not have an explicit financial stability and macroprudential legal mandate, but the BOU Act and the Financial Institutions Act empower the central bank to regulate, supervise and discipline institutions and prescribe prudential norms. - BOU actions: supervises financial institutions and has introduced a wide range of macroprudential policy instruments applied to banks. - Communication of macroprudential decision-making: carried out through circulars, publication of sublegal acts and methodological framework on the website, and release of policy information via the Financial Stability Report and quarterly Financial Stability Review. - Financial stability disclosures: - Annual Financial Stability Report and quarterly Financial Stability Review provide periodic information on system developments and exposure to imminent risks. - Stress-test results disclosed at aggregate level without insight on use of results for policy actions. - Financial Soundness Indicators (FSI) regularly published in tabular format; limited discussion to convey BOU views. - Drafts of foreseen regulatory changes (sublegal acts) are not published for public consultation. - Engagement: active bilateral engagement with financial institutions, stakeholders and academia; less public approach limits broader awareness of BOU policy framework. - Governance and committees: - Financial Stability Committee of the Board (FSCB) oversees formulation and approval of macroprudential policies and frameworks. - Separate Financial Stability Committee (FSC) meets quarterly to review systemic risks, take actions, and implement macroprudential policies. - BOU publishes quarterly Financial Stability Reviews, an annual Financial Stability Report, and an Annual Supervision Report. - Financial Sector Stability Forum (FSSF), chaired by the Minister of Finance, coordinates actions of institutions with mandates over financial sector regulation and supervision. - Analytical improvements: BOU has improved macroprudential policies and analytical frameworks, undertakes regular surveillance and stress-tests, and has developed a crisis preparedness and management framework. - Decision-making transparency gaps: - Interim draft of macroprudential policy framework not formally approved at Board level and not publicly released. - No process of post-evaluation of policy impact on intermediate targets; markets lack understanding of the overall policy framework guiding BOU actions. - Recent sublegal regulation on capital buffers and leverage introduced a transparent communication tactic on governance of policy decisions for macroprudential buffers and expectations on policy evaluations. - BOU provides no public explanation on the benefits of macroprudential instruments and how they fulfill the objective of preserving financial stability. - Public confidence: despite extended macroprudential engagement, public confidence does not reflect policy developments; recent local bank resolutions make cautious communication necessary; current communications focus on policy actions without insight into systemic risk and macroprudential policy. ### Emergency Liquidity Assistance (ELA) - Legal basis: laid out in the BOU Act; in April 2021, BOU Board of Directors ratified the Emergency Liquidity Assistance (ELA) Framework for Supervised Financial Institutions. - Operational framework: draft operationalization not yet published; once approved and published, will include comprehensive transparency practices for ELA based on international practices, excluding specific information on applicable haircuts. - Interim measures: COVID-19 Liquidity Assistance Program (CLAP) operated as an ELA-like facility: - Discloses different forms/operations for liquidity support, distinguishing between bilateral and market-wide support. - Provides clarity on institutional eligibility and central bank decision-making process. - Data on use published in the quarterly financial stability review. - CLAP will stay in place until a new program is approved and published. - CLAP does not foresee enhanced supervision power for the Central Bank or a recovery or funding plan. ### Financial integrity (AML/CFT) - BOU responsibilities: under the Financial Institutions Act and regulations, BOU supervises AML/CFT for commercial banks, credit institutions, microfinance deposit-taking institutions, forex bureaus and money remittances, payment service providers and payment system operators (including mobile money service providers). - Other supervisors: capital markets institutions supervised by Capital Markets Authority; insurance sector supervised by Insurance Regulatory Authority. - Mutual evaluation: AML/CFT regime last assessed in 2016 by the Eastern and Southern Africa Anti-Money Laundering Group; judged to have an overall low level of effectiveness. - Reforms and capacity building: - BOU overhauling AML/CFT supervisory approach; establishment of a dedicated AML/CFT Unit planned to be finalized in June 2022. - The Fund providing technical assistance to assist Uganda and the BOU in pending reforms. - Transparency gaps: - Policies and processes related to AML/CFT supervision are not disclosed on the BOU website; AML Regulations and the recently adopted Anti-Terrorism Act are not available on the website. - Supervisory processes are being overhauled per the action plan agreed between the Government of Uganda and the Financial Action Task Force. - BOU does not disclose information about supervisory policies, powers, resources, outcomes, or cooperation with the Financial Intelligence Authority. - Recommendation: once transition of AML/CFT supervisory framework is completed, BOU should disclose relevant information. - Internal AML/CFT controls: - Internal controls have been limited and are under review; a new policy drafted and pending before the Board. - No disclosure on internal compliance framework, control activities, oversight and accountability, or human and technical resources for AML/CFT functions. - Recommendation: disclose internal AML/CFT framework and policies, descriptions of internal controls, control activities for compliance, and measures of overall effectiveness. *Source: 1ugaea2023002 - Box 1. The BOU’s Ongoing Enhancements to the Communications Strategy and Outreach* ### 56. BOU Act provisions detail the relationship between the Bank and the Ministry of ### 1ugaea2023002 - 56. BOU Act provisions detail the relationship between the Bank and the Ministry of Finance Planning and Economic Development (MOFPED) ### Legal framework and relationship with MOFPED - The BOU Act provides the basis for interactions between the BOU and the MOFPED in the BOU’s mandates in acting as financial advisor to the government on monetary policy, as banker to the Government and manager of public debt, among other duties. - The Act is available on the BOU website and disclosures regarding financial transactions and financial instruments are described as comprehensive and meeting core standards. - Financial transactions between the BOU and MOFPED: - Required profit distributions to the Government are disclosed in the BOU Act. - Recent transfers of securities by the MOFPED to address capital impairment are detailed in the audited financial statements. - The provisions of the BOU Act and Annual Report provide sufficient details on the relationship with MOFPED. ### Coordination with domestic financial agencies and disclosure gaps - The BOU coordinates with domestic agencies: insurance regulatory authority, capital markets authority, and deposit protection fund; coordination is essential for supervision, regulation, and development of the financial sector. - The BOU periodically discloses coordination in the FSR and the BOU Annual Supervision Report. - Identified transparency improvement: - "Disclosure of the MOU between the members of the FSRF would improve the present level of transparency." ### International relationships, EAC initiatives, and private-sector interactions - The BOU Act envisions interactions with international organizations, foreign governments, other central banks, and foreign agencies, including: - On-the-ground presence and agreements with agents and correspondents outside Uganda. - Maintenance of accounts with central and other banks and agreements to act as a correspondent, banker, or agent. - Disclosure of these activities is prominent in the BOU Act and the Annual Report; the BOU website discloses counterpart central banks. - East African Community (EAC) initiatives: - The BOU Annual Report details the transition to a single currency by 2024. - Supervisory college meetings for regionally prominent banking groups (Absa Bank Group Limited, Standard Bank Limited, Ecobank Transnational Incorporated, and United Bank for Africa) are disclosed in the BOU annual supervision report. - Interactions with private entities: - The BOU participates in a multi-lateral memorandum with private entities as part of the Agricultural Credit Facility. - Corporate social responsibility relationships with private parties are disclosed in the BOU Annual Report and on the website; the multi-lateral agreement is available on the BOU website. ### Authorities’ response to the Detailed Review Report and overall assessment - The BOU appreciates the IMF CBTC review conducted March–April 2022 under the pilot program and welcomes the publication of the final review report and recommendations. - Assessment highlights: - "BOU’s transparency practices largely conform to various dimensions of transparency." - Areas for enhancement: autonomy, risk management, confidentiality, financial stability issues, financial integrity, and consumer protection. - The BOU adopted an action plan (Table 2) to implement the fifteen Key Recommendations; the BOU expects complete execution of these actions to be by December 2023. ### Action plan: Selected IMF recommendations and BOU responses (numbered as in source) - 1. Assemble and make easily accessible information on BOU’s legal framework, mandate, autonomy, and roles/composition of decision-making bodies on website; explain inconsistencies and disclose other related legislation. - BOU response: "Amendment of the BOU Act underway. BOU website is to be updated in the interim explaining inconsistences." - Lead: Legal Affairs; Bank Secretariat; completion subject to approval process by Parliament; Bank Secretariat; February 2023. - 2. Enhance risk management transparency by disclosing: (i) general risk statement mapped to mandate; (ii) overview of responsibilities of the risk management function; (iii) overall risk strategy. - BOU response: "A risk appetite and tolerance statement was recently approved by the board, that provides to map risks to the BOU mandate. The Risk Department’s (RCD) input will further improve to cover overall risk strategy in the next annual report." - Lead: Risk & Compliance; to be effected in the Annual Report 2022/23. - 3. Provide clarity on accountability arrangements; publish charters of internal audit function and the Audit and Governance Committee of the Board (AGCB) and information on their main activities. - BOU response: "Publication of audited financial statements and annual reports are on track. The additional information on annual IA activities during financial year FY 2021/22 were provided in the annual report. The BOU will continue to provide information in subsequent reports. In context of publishing the Audit Charter on the website, the Audit & Governance Committee of the Board (AGCB) resolved more reflection is needed before consideration to publish the charter." - Lead: IA and Accounts; Legal Affairs, Internal Audit, Accounts; subject to ongoing consultations. - 4. Enhance transparency of communications policy by disclosing means, methods, and forms of disclosure and excerpts from communications policy and strategic plan. - BOU response: "The process of aligning the BOU Communications strategy with the approved SP2022-27 has been initiated with approval of EXCOM. Communications, completion expected by March 2023. The BOU website is currently being revamped for easier navigation and accessibility. Completion expected by September 2023." - 5. Develop and publish a confidentiality policy and data classification policy. - BOU response: "An Information security policy was approved by the Board. The BOU plans to develop a more specific data classification policy to be covered in the BOU information security regulations." - Lead: Legal & Board Affairs; Medium-term target. Expected completion by June 2024. - 6. Publish MPC deliberations and characteristics of instruments (maturity, interest rate, method, collateral, outstanding volume, etc.) and reiterate band around point inflation target. - BOU response: "Press conferences are held in which the Governor clearly spells out the objective and rationale including the band, the market is aware of the band. BOU is working to gather and publish detailed characteristics of all instruments in the tool kit." - Lead: Deputy Governor, Research and Financial Markets; Implemented by end-October 2022. Financial Markets; to be completed by March 2023. - 7. Clarify role and choice of instruments consistent with exchange rate and monetary policy regime; publish terms of reference of FMOS and rationale for FX interventions. - BOU response: "The BOU agrees on the announcement of the Terms of Reference for FMOS is a welcome development and will adopt immediately upon approval from the senior management. The rationale for FX interventions is always communicated at the Treasurers’ forums. The proposal to publish on the website shall be adopted after consultation with Senior management." - Lead: Research and Financial Markets; to be Implemented by April 2023. - 8. Disclose broad context, governance, and oversight framework of Foreign Exchange Reserves Management. - BOU response: "Financial Markets will liaise with COMs to publish the amended FX Reserves Management Policy following approval from the Board. The context shall include: • The rationale for holding FX reserves • The BOU philosophy of management of FX reserves, and • The Governance framework." - Lead: Financial Markets, Risk & Compliance. Implementation by April 2023. - 9. Clarify FX Administration and Cross-border Flows transparency practices in case of temporary measures; disclose licensing procedures and forms; indicate that Uganda has no capital controls. - BOU response: "The disclosure of licensing requirements are public information and published (Forms, Laws, and Regulations) on the BOU's website. All changes to the licensing requirements including relevant forms will be published on the website in a timely manner. More information to be shared in reports indicating Uganda has no capital controls." - Lead: NBFI Department; Research Dept; by February 2023. - 10. Publish the ELA operational framework (after approval) on the BOU website while not publishing haircuts for collateral. - BOU response: "The guidelines on accessing ELA were circulated to banks in May-2022, and are effective June-2022 and have since been published on the BOU website." - Status: Completed. - 11. Disclose macroprudential policy framework and objectives mapped to instruments; aggregate relevant information under macroprudential section of website. - BOU response: "The BOU to update Financial Stability webpage to include: • Refresh the outdated content and disclose information on Macroprudential Policy Framework, including the way policy is formulated, meeting calendar, and the list of policy measures in effect & links of circulars. • Publish various policy frameworks approved by Board, e.g., Countercyclical Capital Buffer. • Information on the Financial Sector Stability Forum with relevant documents and circulars." - Lead: Financial Stability and COMs departments; to be implemented by May 2023. - 12. Consider disclosure of internal AML/CFT framework and internal controls with appropriate confidentiality and safeguards. - BOU response: "Summary of the approved internal AML/CFT have been uploaded on website." - Lead: Legal Department. Completed. - 13. Disclose information about AML/CFT supervisory processes and procedures; publish relevant legal instruments and an overview in reports. - BOU response: "The inaugural report on BOU’s AML/CFT Unit and supervisory mandate prepared in 2021 Annual Supervision Report. Update provided on inaugural Financial Stability Symposium, held on June 2022. AML regulations 2015, the recently adopted Anti-Terrorism Act as amended 2022 have been uploaded on the BOU website. Guidance notes concerning different aspects of AML/CFT will be published on the website as and when are available." - Lead: Commercial Banking (AML Div); Banking Dept; Completed by September 2022. - 14. Disclose policy, operations, and outcomes regarding consumer protection. - BOU response: "National Payment Systems Act 2020 ... The BOU has also developed consumer protection guidelines and a framework for financial literacy and financial consumer protection. A complaint mechanism has also been developed." - Status: "Consumer protection guidelines have been published on the website. Plans are to upgrade the consumer protection guidelines into regulations are work in progress." - Lead: Communications and NPSD; completed. - 15. Increase disclosure of Financial Sector Regulators Forum (FSRF) efforts including the MOU among FSRF members and periodic updates on FSRF work. - BOU response: "The bi-annual Financial Stability Reports and Financial Stability Symposium will continue to provide status on developments & policies that arise from the work of the FSSF. The MOU is not a public document albeit all signatories to the document retain copies of the MOU. The FSSF will consider holding a joint Financial Sector Regulators symposium in the FY 2023." - Lead: Supervision Directorate. *Source: IMF staff report excerpt from 1ugaea2023002 - 56. BOU Act provisions detail the relationship between the Bank and the Ministry of Finance Planning and Economic Development (MOFPED).* ### 66. The review is based on the current state of transparency practices at BOU. The mission ### The review is based on the current state of transparency practices at BOU. ### Scope and timing - The mission took place during March 30–April 12, 2022. - Initiatives implemented after the review date have not been considered. ### Methodology and coverage - The review maps the BOU’s transparency practices across a range of best practices. - The BOU transparency practices were reviewed in the context of: - the BOU’s legal mandate and policy context, and - the prevailing general legal framework. ### Assessment approach and limitations - In accordance with the CBTC, this review does not assign ratings to the BOU’s adherence to the CBTC principles. - The review is based on the current state of transparency practices at BOU as of the mission dates; subsequent changes are excluded. ### Reference to supporting material - See Table 3. *Source: IMF staff report excerpt (mission: March 30–April 12, 2022).* ### 67. The team appreciated the very high quality of cooperation received from the BOU and ### 1ugaea2023002 - 67. The team appreciated the very high quality of cooperation received from the BOU and ### Cooperation and acknowledgements - The team appreciated the very high quality of cooperation received from the BOU and relevant coordinators. - The team extends its warm thanks to the staff of the BOU for: provision of a self-review, supporting documentation, technical support, and facilitation of the mission meetings schedule. ### Pillar I — Central Bank Governance: Principle 1.1 Legal Structure - Description - The Bank of Uganda (BOU) discloses its legal framework to the public; an updated version of the Bank of Uganda Act 2000 (BOU Act) is available on the BOU website. - The BOU Act sets out the BOU’s objectives, functions and powers; the objectives (“mission”) and functions (“core activities”/”mandate”) are also described on the BOU website and in its annual report. - Website lists other laws and regulations applicable to the BOU, including legal framework adopted with respect to financial institutions. - The Constitution establishes: (i) the mandate of the BOU; (ii) the composition of its Board of Directors; (iii) the appointment procedure applicable to the Governor, Deputy Governors and other members of the Board; (iv) their dismissal criteria; and (v) the BOU’s institutional autonomy. - The Annual Report clarifies that the BOU derives its mandate from the Constitution, which vests authority of the BOU in the Board of Directors and spells out the BOU’s functions. - BOU Act does not clarify which law prevails in event of conflict with other laws; BOU clarified that Constitutional provisions relating to the BOU would prevail. - A BOU (Amendment) Bill (BOU Bill) discussed with the MOFPED is due to be debated at Cabinet; proposed amendments include alignment of the BOU Act with the Constitution and Uganda’s regional commitments, and incorporation of Byelaws provisions into the Bill. Proposed amendments and review are not yet publicly disclosed. - BOU is 100 percent owned by the Government but is not a government department (disclosed on website). - Judicial review: BOU clarified that as a body corporate it may sue and be sued and its activities are subject to judicial review pursuant to the Judicature (Judicial Review) Rules 2009. No information on protection from pre-judgment attachments; BOU clarified it is not protected from attachments within Uganda. - Review Core / Expanded - Legal framework governing the central bank is well disclosed; technical issues not explained on webpage and information is placed in different materials that may not be easily accessed. - Legal nature and ownership clarified; Byelaws expected to be incorporated into Bill but currently not disclosed on website and not easily accessible. - Legal protection information is not disclosed by the BOU. - Comments / Recommendations - Enhance transparency by explaining on the BOU website the legal framework, legal nature, and legal protection of the BOU in an understandable manner. - Streamline website by including in one section: (i) BOU’s objectives (mission), main functions (core activities) and powers; (ii) description of general framework including the Constitution; (iii) whether BOU Act prevails in event of conflict with other laws; and (iv) legal protection applicable to the BOU. ### Principle 1.2 Mandate - Description - The BOU’s mission of fostering price stability is clearly stated on the BOU website and Annual Report; the Annual Report identifies financial system development and stability as a strategic focus area. - Constitution focuses on promotion of economic development through effective and efficient operation of a banking and credit system; under the BOU Act and Constitution objective is conflated with functions, placed under provision of functions which includes supervision and regulation of all financial institutions. - BOU clearly defines its quantified price stability objective with its inflation target on its website and Annual Report. - Functions disclosed in BOU Act, Constitution, website, and Annual Report; Annual Report sets out additional functions including overseeing national payment and settlement systems; regulatory developments disclosed. - Powers set out throughout BOU Act with a general provision giving BOU all necessary powers; Annual Report discloses powers related to monetary and financial policy; BOU Act contains list of prohibited activities. - Review Expanded - Objective clearly specified on website and Annual Report together with legal foundation; financial system stability objective not apparent under Constitution and BOU Act; objective and functions conflated in BOU Act and Constitution. - Inconsistencies exist between functions disclosed across documents. - Comments / Recommendations - Pending BOU Act amendments, streamline objective and functions on website and Annual Report with BOU Act and Constitution. - Enhance disclosure by clarifying financial stability objective, functions and powers regarding macro-prudential policy. - Provide a comprehensive list and description of all BOU functions and a list of powers with brief descriptions of how they support functions. ### Principle 1.3 Autonomy - Principle 1.3.1 Institutional/Operational Autonomy - Description - Institutional autonomy enshrined in the Constitution. - BOU Act provides Secretary to the Treasury is a Board member who is not excluded from voting; Board can invite consultants/advisors to meetings. - Audit conducted by Auditor General (or an auditor appointed on his behalf) as mandated by the Constitution. - Review Expanded - Constitution clearly stipulates institutional autonomy. - Not apparent from website or Annual Report that one of the non-executive Directors is a government representative. - Role of the Minister as per BOU Act is not disclosed; website states BOU conducts activities in close association with the MOFPED. - Comments / Recommendations - Disclose on website the institutional autonomy as enshrined in the Constitution and elaborate on interaction between BOU and Minister/MOFPED, including whether non-executive Directors include a government representative. - Principle 1.3.2 Functional Autonomy - Description - BOU Act vests Board with responsibility for policy formulation; website and Annual Report set out how monetary policy goal is determined and instruments used. - Under BOU Act, Minister’s approval is required before BOU can issue byelaws regulating internal matters and regulations under BOU Act are made by the Minister. - Review Core - Website and reports set out monetary policy role but functional autonomy is not explicitly disclosed. - Requirement to obtain prior approval or consult the Minister for several powers under BOU Act is not disclosed on website. - Comments / Recommendations - Disclose on website, Annual Report and Monetary Policy Report that BOU has functional autonomy in terms of monetary policy. - Disclose the role of the Minister with respect to other BOU decisions. - Principle 1.3.3 Personal Autonomy - Description - Constitution sets out appointment procedure, term and dismissal criteria for Governor, Deputy Governor, and non-executive Directors; BOU Act provides procedures, term, eligibility, and incompatibility criteria. - Website and Annual Report disclose appointment procedure and term of office. - Governor and Deputy Governors are public officers affording constitutional protection; BOU clarified their remuneration is determined by the Board and Minister and set out in letters of appointment; specific remuneration procedure for Governor and Deputy Governor not explicitly provided in BOU Act. - BOU Act provides for remuneration procedure of non-executive Directors determined by Board in consultation with Minister; Annual Report discloses remuneration of non-executive Directors for that financial year. - Board Charter contains detailed provisions on remuneration for non-executive Directors but is not publicly available. - BOU Act clarifies extent to which employees are liable for damages; Byelaws confirm indemnity for directors, officers, and employees for acts done in good faith but Byelaws are not easily accessible. - Review Expanded - Personal autonomy clarified in Constitution and BOU Act; key elements disclosed on website. - Inconsistencies between Constitution and BOU Act regarding appointment terms and appointing authority are not clarified. - Unclear if incompatibility criteria for non-executive Directors are applicable to Governor and Deputy Governor, although BOU confirmed they are. - Comments / Recommendations - Website section on “Management of BOU” could clarify personal autonomy of executives and board members including Constitutional provisions, appointment procedure, terms of office, removal criteria, grounds and procedures for dismissal. - Communicate other mechanisms ensuring security of tenure and rationale for personal autonomy. - Principle 1.3.4 Financial Autonomy - Description - BOU Act and Annual Report clarify arrangements regarding capital, reserves, provisions, profit distribution mechanism, monetary financing, and applicable accounting standards; includes decision-making procedures for provisions, accounting treatment of foreign exchange gains/losses, rules on distribution of dividends to Government, and provisions for recapitalization. - Budget arrangements implied rather than explicit; no provision on budget autonomy though Board is responsible for formulating policies and managing affairs. - Monetary financing provisions set out in BOU Act; details provided in Annual Report; Annual Report refers to Public Finance Management Act 2015 but does not elaborate applicable provisions. - Applicable accounting standards are disclosed in Annual Report financial statements notes though BOU Act is silent on them. - Review Expanded - Arrangements on financial autonomy well disclosed in BOU Act and detailed in financial statement disclosure notes. - Rationale for financial autonomy not communicated; clarity lacking on budget autonomy and specific references to Public Finance Management Act 2015 provisions. - Comments / Recommendations - Assemble information relating to financial resources and rationale for financial autonomy in one website section. - Provide clarity on Public Finance Management Act 2015 as it relates to the BOU. ### Principle 1.4 Decision-Making Arrangement - Description - Constitution vests authority of the BOU in the Board of Directors; BOU Act makes Board responsible for general management and policy formulation. - Role and functions of Board disclosed on website and in “Corporate Governance” section of Annual Report, including oversight functions. - BOU Act (Schedule) and Byelaws disclose Board meeting operations: chairperson, frequency, quorum, voting arrangements and minutes. Byelaws provide Governor (or in his absence Deputy Governor), in consultation with Board, responsibility for consideration, formulation and execution of credit policy, and organization/management of the BOU. - Annual Report discloses Governor and Deputy Governor responsible for routine operations and establishment of Management Committees to facilitate decision-making (policy, technical, administrative). - Website has brief overview of management structure and link to current macro-structure. - Composition of Board and Board Committees disclosed on website and Annual Report; management committees composition disclosed in Annual Report. - Terms of Reference of Board Committees and Management Committees are not disclosed. Board Charter elaborates on purpose, composition and operation of Board Committees and Executive Committee but is classified for internal use only. - Monetary Policy Committee (MPC) referenced in Monetary Policy Reports and Statements; Annual Report discloses MPC as a Management Committee chaired by Governor. Board Charter states MPC decisions require Board ratification or approval; BOU clarified MPC’s Terms of Reference are approved by Board but its decisions are not. - Review Expanded - Organizational structure clarified via disclosure of functions, composition and allocation of responsibilities. - Observations: (i) website lacks information on role of the Governor; (ii) insufficient clarity on Governor’s credit policy formulation role per Byelaws and interaction with BOU Act requirement to consult Minister before prescribing specific credit and interest rate requirements; (iii) Terms of Reference of committees not disclosed; (iv) inconsistencies in disclosure of bodies responsible for monetary policy leading to potential confusion; (v) website appears not updated with respect to BOU Board members. - Note: It is observed from the 2021 Annual Report that the term of the Secretary to the Treasury expired in July 2021. - Comments / Recommendations - Clarify on the website the role of the Governor in day-to-day management and responsibility for credit policy including interaction with Minister approval requirements. - Update Terms of Reference, composition and roles of Board and Management Committees on the website. - Make Byelaws more easily accessible (e.g., include under “Acts & Regulations”). - Pending amendments to institutionalize the MPC as decision-making body for monetary policy, clarify roles of MPC and Board in formulation of monetary policy. ### Principle 1.5 Risk Management - Principle 1.5.1 Risk Exposure - Description - BOU Annual Report 2021 (chapter 12.18. Risk Management) provides overview of key central bank risks: (i) financial; (ii) credit; (iii) market; (iv) liquidity; (v) operational; and (vi) compliance. - Discusses main qualitative developments in these risks and risk management practices during the financial year, including impact of the COVID-19 pandemic. - Disclosures on operational risk cover cyber security and business continuity management. - FY 2021 Financial Statements (Note 4) provide more disclosures on operational and financial risks, including detailed information on level of and quantified development in exposures to principal financial risks: credit, liquidity, interest rate and currency; covers both foreign and domestic currency financial instruments. - Annual Report 2021 (chapter 8.1. Foreign Exchange Reserves and investment management operations) includes investment objectives, level of foreign reserves, return on foreign assets and a risk statement for foreign reserves management indicating: (i) minimum credit rating A3 for eligible investments and counterparty limits for credit risk; (ii) adherence to strategic and tactical asset allocation for market risk; and (iii) commitment to a range of three to six months of import coverage for liquidity risk. - Review Expanded - Annual Report 2021 and FY 2021 Financial Statements contain a high-level overview of key risks but risks are not mapped to the BOU’s mandate and the role of risk management in pursuit of its objective is not disclosed. - Financial risk disclosures are comprehensive (qualitative and quantitative). Disclosures on operational and compliance risks are limited to qualitative information. - Risk statement fragmented and limited to principal financial risks and foreign reserves management. - Comments / Recommendations - Enhance transparency by: (i) mapping key risks to the BOU’s mandate; (ii) providing quantitative information on developments in operational and compliance risks; and (iii) publishing a general risk statement outlining BOU’s stance on risks and role of risk management function. - Principle 1.5.2 Risk Framework - Description - Risk governance and oversight arrangements are not defined in the BOU Act. - Annual Report 2021 provides overview of risk governance structure: (i) Board of Directors collectively responsible for providing a prudent and effective risk management framework (chapter 12.3. The Board of Directors); (ii) Audit and Governance Committee of the Board (AGCB) provides assurance on effective risk management (chapter 12.10. Board committees); and (iii) Executive Committee (EXCOM) has a sub-committee responsible for risk management (chapter 12.13.1. Apex committees of management). - FY 2021 Financial Statements (Note 4. Financial Risk Management) provide more disclosures on financial risk governance roles including Board of Directors, Foreign Exchange Reserve Management Policy Committee and AGCB. - A Risk Unit is responsible for maintaining the financial risk management framework and a Financial Services Group operates an independent risk reporting system. - Role of the Risk and Compliance Department is disclosed in credit risk management process. - Overview of risk management process is provided in Annual Report 2021 (chapter 12.18. Risk Management) for compliance risk and in FY 2021 Financial Statements (Note 4) for operational, credit, liquidity, interest rate and currency risks. - Risk strategy for credit risk of foreign and domestic currency assets disclosed in FY 2021 Financial Statements (Note 4). - Review Expanded - Risk governance structure and roles are described across Annual Report and FY 2021 Financial Statements, with specific units and committees identified for financial risk management and reporting. - Comments / Recommendations - Consider defining risk governance and oversight arrangements in legal or consolidated public materials and provide clearer mapping of risk framework to mandate and operational activities. *Source: 1ugaea2023002 - 67. The team appreciated the very high quality of cooperation received from the BOU and relevant coordinators (excerpts from the Bank of Uganda CBT Review—Detailed Review Table).* ### references to applicable standards and frameworks, including a high-level description ### references to applicable standards and frameworks, including a high-level description ### Overview and key findings - The overall risk strategy of the BOU is not disclosed; disclosure of risk strategy is limited to credit risk. - The BOU’s Annual Report 2021 and the FY 2021 Financial Statements contain an overview of risk governance arrangements and of the risk management process. - The BOU legal framework is silent on the allocation of responsibility for risk oversight and risk management and internal regulations are not published. - The central bank legal reform initiated by the BOU provides an opportunity to introduce provisions on allocation of responsibility for risk oversight and risk management among the central bank’s decision-making bodies. - FY 2021 Financial Statements include substantive disclosures on the impact of COVID-19 on the BOU’s operations (see Note 4.8). - The FY 2020 Financial Statements are IFRS-compliant and comprehensive. ### Risk governance and transparency — recommendations and disclosures - Recommendations to enhance transparency on the risk framework: - (i) provide an overview of responsibilities of the BOU’s units involved in the risk management process; - (ii) disclose risk strategies (risk avoidance, mitigation, and transfer) in key areas. - Further transparency measures suggested: - (i) disclose internal regulations pertaining to risk oversight and risk management; - (ii) disclose developments in the BOU’s risk framework; - (iii) provide a high-level overview of policies in times of crisis (e.g., to act as a lender of last resort in case of a systemic shock). ### Principle 1.6 Accountability Framework — Arrangements (Principle 1.6.1) - Legal and procedural descriptions: - Section 43 of the BOU Act requires the BOU accounts to be audited, at least once every financial year, by the Auditor General or an auditor appointed by him or her to act on his or her behalf. - Section 23 of the National Audit Act specifies that the Auditor General may appoint private auditors registered and practicing as an accountant under the Accountants Act to assist him or her in the performance of his or her functions. - Section 49 of the BOU Act states that the BOU shall, not later than three months after the end of each financial year, present to the Minister a report generally on the activities and operations of the bank during the preceding financial year and in particular: (a) with regard to the procedures and policy of the bank as the bank considers may properly be given without detriment to the interests of the activities of the bank; (b) a copy of the audited accounts. The Minister shall lay before Parliament the report within three months after the end of the financial year. - Section 44 of the BOU Act requires the BOU to publish a quarterly return of its assets and liabilities in the Gazette as soon as may be practicable after the end of each quarter. - Gaps and weaknesses identified: - The legal framework contains provisions for an external audit but does not specify that the audit should be in accordance with international standards. - The BOU Act requires audited accounts to be within the annual report but is silent on publication of the annual report. - The BOU Act is silent on the establishment of the internal audit function and does not contain provisions on the internal audit nor the AGCB (Audit and Governance Committee of the Board). - The Board of Directors established the AGCB through its Manual (Charter) – an internal regulation that is not published. - Suggested legal reforms and disclosures: - (i) provide for the publication of the audited annual financial statements and annual report, including a deadline for the publication; - (ii) specify the applicable accounting standards for preparation of audited accounts; - (iii) require the external audit to be conducted in accordance with international standards. - For internal audit: publish the Internal Audit Charter or its summary on the BOU’s website; include provisions on: (i) roles and duties of an internal audit function; (ii) reporting lines to senior management and the AGCB; (iii) criteria for appointment and dismissal of the head of the internal audit function. - For the AGCB: explain the terms of reference and role of the committee in the governance section of the BOU’s website; publish the Board of Directors Manual (Charter) or a summary of its chapter on the AGCB; explicitly assign responsibility to oversee matters on financial reporting, external and internal audit to the AGCB; provide for mechanism for reporting by the AGCB. ### Principle 1.6 Accountability Framework — Tools (Principle 1.6.2) - Descriptions of current practice: - The BOU prepares financial statements in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the BOU Act. - The BOU’s Annual Report 2021 includes a complete set of independently audited financial statements and a comprehensive discussion on the activities of the central bank. - FY 2021 Financial Statements are accompanied by the Auditor General’s report, which includes an external audit opinion referring to the International Standards on Auditing and includes key audit matters. - Publication of the annual financial statements is within the statutory deadline for presenting them to the Minister, i.e., three months after the end of the financial year. - Internal audit disclosures (current limitations): - Annual Report 2021 chapter 12.19 provides a basic description of the internal audit function’s role: to provide assurance to the Board and Management through risk-based reviews in line with the Annual Work plan approved by the AGCB. - AGCB approved the Audit Charter and Internal Audit manual; the Directorate carried out an internal quality self-review to ascertain level of compliance to the International Professional Practices Framework. - Missing disclosures: conformance of Internal Audit Directorate activities with its charter; rules governing independence and reporting structure; conformance with international standards; high-level description of activities during the period (number of revisions performed, areas covered, level of recommendations issued, and fulfillment rate). - Audit Committee disclosures (current limitations): - Annual Report 2021 lists members of the Board and committees, number and attendees of meetings, and specifies AGCB composition (all five non-executive directors and the Chief Internal Auditor in attendance; Deputy Governor attends on invitation). - AGCB composition is disclosed on the BOU’s website (Audit and Governance Committee of the Board). - Missing disclosures: AGCB’s responsibilities as set out in its charter; descriptions of AGCB’s key activities during the financial year. - Recommended transparency enhancements: - For internal audit: include in the annual report and/or on the BOU’s website: (i) a section on responsibilities of the internal audit function and a high-level description of its activities during the previous financial year; (ii) rules governing its independence and reporting lines (including to the AGCB); (iii) a basis for the audit methodology and the function’s conformance with its charter and international standards. Disclose overall opinion of periodic external quality Reviews. - For AGCB: include in the annual report and/or on the BOU’s website an overview of: (i) the AGCB’s responsibilities as set out in its terms of reference/charter; (ii) its key activities related to the internal and external audit mechanism, internal controls, and the financial statements during the previous financial year. Consider preparing and publishing an annual activity report for the AGCB. ### Principle 1.6 Accountability Framework — Anti-Corruption Measures and Internal Code of Conduct (Principle 1.6.3) - Applicable legal framework and institutions: - The 2009 Anti-Corruption Act (as amended in 2015 and 2018) applies to public bodies and public officials; confirmed applicable to BOU staff in the BOU Administrative Manual. - The Leadership Code Act 2002 (as amended in 2017 and 2021) requires declaration of incomes, assets, and liabilities, and the 2021 amendments extended application to all “public officers”, a term defined in section 2 to mean any person holding or acting in a public service capacity of the Government. This extends to decision-makers and staff of the BOU. - The Inspectorate of Government Act 2002 operationalizes powers of the Inspectorate of Government as an independent institution charged with eliminating corruption, abuse of authority and of public office. - The Anti-Corruption Act and the Penal Code are accessible through the Act Reporting Unit of the Uganda Judiciary webpage. - BOU internal Code of Conduct and related rules: - The BOU has a comprehensive Administrative Manual that is available only internally. - The Administrative Manual provides policies on expected conduct including: dutiful fulfillment of functions (chapter 4.6); disclosure of personal interests (chapter 4.13); gift policy (chapter 4.23); anti-fraud policy (chapter 23); whistleblowing policy (chapter 24); and an overall compliance management framework (chapter 25). - Chapter 25.2 states that the BOU “shall fully comply with all applicable legislation, acts, instruments, regulatory obligations, guidelines, legally binding directives, protocols, standards, ethical codes and the Bank’s core values.” - Chapter 25.3 clarifies that this compliance commitment applies to the “Board of Directors, Governor, Deputy Governor, Executive Directors and Directors and all other employees and agents of the Bank.” - Chapter 5.3 lists possible offences in relation to the code and chapter 5.4.6 provides for possible remedies and penalties. - Transparency gaps: - The Administrative Manual is available only internally; public disclosure of the Internal Code of Conduct or a summary is not currently provided. *Source: 1ugaea2023002 - references to applicable standards and frameworks, including a high-level description* ### Chapter 5.4.3 further establishes the Management Disciplinary Committee for handling ### 1ugaea2023002 - Chapter 5.4.3 further establishes the Management Disciplinary Committee for handling ### Code of Conduct and Board Charter - Chapter 18 of the BOU Board Charter includes the Code of Conduct. - Rule 18.2(a) of the Code of Conduct: “The Board of Directors of Bank of Uganda has approved the Code of Conduct [the Code] to provide guidance on matters of professional and personal behavior. The code, therefore, applies to the Directors, alternates, and any accompanying person[s] participating in the meetings of the Board and Board Committees to provide guidance on matters of professional and personal behavior.” - The Code of Conduct does not extend to BOU staff and agents. - The Code includes provisions on avoiding conflicts of interests (chapter 18.5) and acceptance of gifts and any other advantages (chapter 18.7). - Board room best practices and expected standards of behavior are set out in chapter 13 of the Board Charter. - Application and supervision of the Board Charter and its Code of Conduct are the responsibility of the Chairman of the Board and the Board Secretary. - Review status: Review Not Implemented ### Management Disciplinary Committee and Administrative Manual - Chapter 5.4.3 further establishes the Management Disciplinary Committee for handling staff grievances and disciplinary cases. - The Administrative Manual exists internally but is not publicly available; the existence of the Code of Conduct is also not disclosed. ### Anti-corruption legal framework and transparency - Uganda’s anti-corruption legal framework applies to the BOU’s staff and decision-makers. The relevant legislation is available online. - Internal documents (Administrative Manual and Board Charter with Code of Conduct) provide requirements on expected behavior of staff and Board members to prevent corruption and conflicts of interest; these documents are not disclosed. - Comments / Recommendations: - The BOU should consider providing information on its website regarding the applicable anti-corruption legal instruments and clarify how these are applicable to the decision-makers, staff, and agents of the BOU. - The BOU should consider disclosing the existence of internal rules regarding the applicable conduct of its staff and Board members. An overview of the expected behaviors and conduct, as well as rules on preventing corruption and conflicts of interest should also be available on the BOU website, including possible publication of the Code of Conduct. - The BOU should consider disclosing information on any breaches of its internal rules regarding the expected conduct. ### Human Capital Management (Principle 1.6.4) - Principle: The central bank discloses its policies and practices concerning the governance and management of human capital. - Description highlights: - BOU Annual Report 2021 (chapter 11.1. Managing the Bank) states management depends on ability to attract, motivate, develop, and retain engaged diverse talent; contains brief information on internal promotion and internal recruitment, and the number of the BOU’s employees and composition of staff by role and gender. - BOU Annual Report 2021 (chapter 11.3. Investing in resilience) discloses initiatives for capacity building, including training in strategic priority areas; discusses changes in the BOU’s employee performance and reward management policy. - BOU website (Careers- Bank of Uganda) provides information on employment, including vacant positions, and the internship program. - BOU Annual Report 2021 (chapter 11.2. Work approaches during the pandemic) provides an overview of actions taken to ensure business continuity and achievement of strategic objectives during COVID-19 restrictions. - Review status: Core - Gaps identified: - No explicit references to diversity and inclusion. - No explicit references to leadership and succession planning or programs. - The BOU does not publicly disclose the applicable policies for attracting, promoting, and retaining employees; these policies are consolidated on the central bank’s intranet and in the Administration Manual—an internal regulation that is not published. - Comments / Recommendations: - Improve transparency by including details in the annual report and/or publishing on the BOU’s website: (i) further information on diversity and inclusion; (ii) information on the BOU’s leadership and succession plan; and (iii) high-level rules/statement on policies for attracting, promoting, and retaining employees. ### Communication (Principle 1.7 and 1.7.1) - Principle: The central bank discloses means and methods of communication and the forms of disclosure of information to its stakeholders. - BOU Powers and Mandate for Disclosure and Transparency (as codified in the Bank of Uganda Act, published on the BOU website): - Section 34: Report on Advances to the Government and local governments; - Section 40: BOU may publish financial institution information; - Section 44: BOU returns must be published and powers to submit information to the Minister; and - Section 49: BOU must provide to the Minister an annual report. - The BOU is subject to the AIA; that Act is not published on the BOU website but is available through independent sources. Regulations issued in 2011 by the Ministry of Information and National Guidance (MOING) provide required Forms (Schedule 2) for information requests and agency responses. There is no procedure on the BOU website that facilitates requests as detailed in the AIA. - Organizational structure and communications implementation: - The BOU publishes a summary of its organizational structure, that was approved in 2017, on its website. - Director of Communications leads an office under the Bank Secretary that reports to the Deputy Governor and ultimately the Governor. - Main contact for public queries is the Director of Communications via the FAQ landing page. - Daily communication and disclosure is a cross-cutting effort involving the Governor’s Office, the Banking Secretary, the Office of the Director of Communications, relevant technical departments, and the legal department where legislative interpretation is needed. - The BOU has developed a Communications Policy 2020 and a Communications Strategy FY 2020-21 to FY 2024- *Source: 1ugaea2023002 - Chapter 5.4.3.* ### 25. However, these key documents along with the BOU’s Strategic Plan 2017-22 are not ### 1ugaea2023002 - 25. However, these key documents along with the BOU’s Strategic Plan 2017-22 are not ### Transparency and Legal Framework - Key BOU documents (communications policy, communications strategy, BOU-wide Strategic Plan 2017-22) are treated as “internal documents” and are not publicly disclosed. - The BOU must adhere to the BOU Act and the Access to Information Act (AIA); the AIA and its detailed regulations apply to the BOU. - The Ministry of Finance, Planning and Economic Development has developed the Principles Amending the Bank of Uganda Act (2000), which is not publicly released and does not materially focus on transparency and disclosure provisions except for a newly required report on financial stability and monetary policy to the Minister. - Comment/recommendation: BOU should address outdated legal infrastructure; disclose the communications policy and strategy; post the AIA to its website; and facilitate requests under that Act. ### Communications Strategy and Channels - BOU has: - Communications Strategy for 2020-21 to 2024-25 focused on supporting the corporate strategic plan and communications within and outside the Bank. - BOU-wide Strategic Plan 2017-22 referencing communications and a multi-channel approach. - Identified challenges: loss of trust due to multiple crises; internal communication weaknesses. - Strategic initiatives: review, update, and implement communication strategy; rebuild credibility and reputation; develop crisis communications and management strategy (BOU crisis management plan finalization during 2022). - Target audiences: stakeholders mapped by level of interest and influence; inferred audiences include depositors concerned with safety of funds. - Channels and tools: - Categories: face-to-face, mass media, digital, community-based. - Strategy references “a multi-channel approach” with currently over 30 such channels. - Prominent monetary policy channels: Monetary Policy Statement (MPS) after each Monetary Policy Committee (MPC) meeting and companion press conference. - Financial stability channels: annual Financial Stability Report (FSR), quarterly Financial Stability Review, and Annual Report. - Website features: - FAQ tab and Media Center (speeches, press releases, events calendar, lectures, public education documents, YouTube videos). - No institutional repository or portal for collecting and disseminating digital output. - Publications: released on social media and traditional outlets; website has centralized access to regular and special publications. - Reviews: - Communications policy, strategy, and broader BOU strategy are not publicly released. - Website layout and channel diversity indicate active promotion of strategy; demonstrated follow-through on 2017-22 strategy elements as applied to communication. - Comments/recommendations: - Release excerpts from the communications policy and strategy and the broader strategic plan that do not contain sensitive information. - Update out-of-date website information (example: macroprudential policy page and financial stability governance). ### Confidentiality and Secrecy Policy (Principle 1.8) - Legal provisions: - Section 45 (declaration of secrecy) of the Bank of Uganda Act requires board members, officers, and employees to not disclose material information acquired in performance of functions, except as provided; written permission of the BOU required to disclose, with exception to provide evidence in court. - Contravention risks imprisonment or a fine. - Practical application: - BOU states it responds to requests for confidential information and, when determined confidential, explains why information cannot be shared. - The Ministry of Information and National Guidance (MOING) regulations to the AIA address protection of confidential information and require a notice with reasons and legal provisions when access is refused (Schedule 2 of the regulations). BOU does not consistently provide reasons for refusal and provisions of the Act relied upon. - BOU is subject to the Data Protection and Privacy Act, 2019, regulating collection, processing, rights of persons, and disclosure of personal information. - Internal governance: - Decision on confidentiality currently based on Board Charter and Code of Conduct (paragraph 18.6 restates Section 45); Board Charter and Code of Conduct detail inside information cases. - Board Charter and Code of Conduct are not publicly available on the BOU website. - Gaps: - No general public policy on confidentiality or continuum/classification (e.g., public, restricted, confidential). - Draft reforms and draft bill provided but secrecy provisions remain unchanged (Section 45 in current Act; Section 59 in draft reforms). - BOU does not consistently provide reasons for refusal and legal provisions relied upon when denying information requests. - Comments/recommendations: - Publish more information regarding confidentiality policies to clarify disclosable vs. confidential information. - Develop a policy using past request logs to establish a continuum of disclosure versus confidentiality/secrecy with clear bright-line rules. ### Monetary Policy (Pillar II — Principle 2.1) - Mandate and framework: - BOU Act (Article 4) mandates “formulate and implement monetary policy directed to economic objectives of achieving and maintaining economic stability.” Without prejudice to this primary objective, the BOU shall also maintain monetary stability. - Parts V-VII of the Act list instruments: open market and credit operations, security purchases and sales, reserve requirements. - BOU pursues an inflation targeting lite regime adopted in July 2011. - Primary policy objective: maintain annual core inflation at 5 percent over the medium run. - Secondary objective: ensure real output is as close as possible to the economy’s potential level. - Operational targets and instruments: - Sets Central Bank Rate (CBR) to influence marginal funding cost of banks. - Regularly intervenes to keep the 7-day interbank rate within a band of ±2 percentage points around the CBR. - Information on framework and implementation is available on the website (The Monetary Policy Overview). - Communication and publications: - Monetary Policy Statement (MPS) after each MPC meeting. - Monetary Policy Report (MPR) published every two months. - Annual Report discusses monetary policy. - MPS at a glance: simplified visual layered communication. - Press conferences follow meetings (virtual since COVID-19); MPR published about 2 weeks after each MPC meeting. - MPC details: - MPC is decision-making body; its structure and functions not established in the BOU Act. - Composition of MPC not publicly available; AREAER mentions decisions are made by consensus. - MPC scheduled to meet every other month (6 times a year); next meeting date currently announced in advance (Bank of Uganda | MPC Meeting Calendar). - Supporting analysis and forecasting: - MPR reports inflation forecasts with fan charts and regularly presents alternative scenario analysis based on assumptions (fiscal deficits, commodity prices, exchange rate). - GDP forecasts published quarterly in The State of the Economy report but without graphs or scenario analysis. - The forecasting model used by BOU is not published. - Staff analytical work is published as working papers accessible on the website (BOU | Staff Working Papers). - Reviews: - Disclosure rated Comprehensive for framework; Core for policy decisions (given gaps on MPC composition); Expanded for supporting analysis (no model disclosure). - Comments/recommendations: - Amendments to BOU Act aiming to establish price stability as primary objective and outline operations have been proposed. - Communications could reiterate that the inflation targeting lite regime involves a ±3 percentage points band around the point target. - Provide information on composition and voting procedures of the MPC on the website; publish MPC meeting schedule for the full calendar year; clarify arrangements for extreme/irregular circumstances. - Publish the model used for forecasts and policy analysis (BOU has expressed intention to publish the model). ### Cross-Border Flows and Foreign Exchange Administration (Principle 2.2) - Legal framework: - Foreign Exchange Act (FEA) 2004 and Foreign Exchange Regulations 2006 define BOU powers on foreign exchange policy. - FEA clarifies attributions and powers distinct from government and other agencies; Article 18 allows BOU to make regulations; Section 20.1 repeals Exchange Control Act (no capital controls); Section 10 clarifies BOU may establish exchange restrictions in case of severe Balance of Payments deterioration. - Review: - Framework disclosed in FEA; attributions/responsibilities clearly distinguished and disclosed; no delegation of authority. - Comments/recommendations: - Disclosure of a website section reaffirming general objectives, elements, attributions, responsibilities, and powers would enhance transparency. - Disclosure of decision-making process details for temporary restrictions would enhance transparency. ### Foreign Exchange Management and Interventions (Principle 2.3) - Legal and operational provisions: - BOU Act: - Article 18: board shall, in consultation with the Minister, prescribe framework for determining external value of the shilling. - Article 19: BOU may auction foreign currency and buy/sell foreign currency at market-determined rates and on terms the board may determine. - BOU explains exchange rate management within the Monetary Policy Framework and bi-monthly MPC statements; BOU describes a floating exchange regime with interventions to smooth volatility and to build reserves. - BOU discloses aggregate amounts purchased and sold for intervention and reserve building in bi-monthly MPRs; specific motivations disclosed in some instances (example: April 2020). - IMF AREAER defines de jure and de facto exchange rate as floating. - BOU publishes UGX exchange rate against USD three times a day and against GBP, EUR, KES, TZS, and ZAR once a day. - Institutional framework: - Annual report describes MPC and Financial Market Operations Sub-committee (FMOS) chaired by the Deputy Governor; FMOS meets daily to implement monetary policy actions in line with MPC decisions. - Decision process and disclosure: - BOU intervenes to smooth volatility in IFEM and to build reserves; interventions occur in the spot market via Refinitiv platform in IFEM. - No publicly available a priori transparent framework document for decision-making on FX interventions; internal intervention guidelines exist. - Rationale and process for recent interventions have been explained (e.g., activation in April 2020). - Reviews: - Expanded disclosure on general rules, intended objectives, and reasons to intervene. - Comments/recommendations: - Consider further disclosure on operational and institutional framework, such as terms of reference of the FMOS. - Publish explanatory section on potential use of temporary restrictions and underlying economic considerations. ### Foreign Exchange Reserves Management (Principle 2.4) - Mandate and objectives: - Section 31 of the Bank of Uganda Act 2000 mandates FX reserves management. - 2021 Annual Report states objectives: capital preservation, liquidity, and reasonable returns, consistent with acceptable risk. - Governance and oversight: - Annual Report discloses broad risk exposure parameters and roles of Board, Board Committees and Executive Management. - Foreign Exchange and Reserves Management Committee (FERMC) provides guidance and monitoring; FERMC has one subcommittee chaired by Executive Director Finance. - Disclosure and analysis: - Operative models for risk management discussed broadly in notes to financial statements. - Annual Report discloses analytical considerations and constraints in global investment environment; risk management considerations and constraints detailed in notes to financial statements. - Reviews: - Core disclosure of broad objectives, risk exposure, governance, and investment structure. - Comments/recommendations: - Publish a dedicated Report on International Reserves with detailed objectives of policy decisions, governance, credit and market risk exposure, investment benchmarks, and interaction with other BOU policies. - Create a dedicated website section for Foreign Exchange Reserves with explicit explanations and terms of reference of FERMC and broad risk exposures as per the internal Foreign Exchange Reserves Management Policy. ### Macroprudential Policy (Principle 2.5 — introduction) - Description: - BOU website quotes the BOU Act preamble mission: “foster price stability and a sound financial system...”. - BOU Act and Financial Institutions Act (FIA) do not explicitly provide a mandate for financial stability and macroprudential authority. - Implication: - The legal mandate for macroprudential policy is not explicit in the cited Acts based on the provided text. *IMF staff assessment and commentary based on the content of the provided document.* ### Section 4 of the BOU Act and section 27 and 131 of the FIA implicitly lays the ### 1ugaea2023002 - Section 4 of the BOU Act and section 27 and 131 of the FIA implicitly lays the ### Legal framework and mandate for macroprudential policy - Section 4 of the BOU Act and section 27 and 131 of the FIA "implicitly lays the foundation for a macroprudential policy function." - These sections empower the BOU to "regulate, supervise and discipline all financial institutions and pension funds and prescribe prudential norms." - Based on this legal framework, BOU "has exercised the powers to issue macroprudential policy decisions." - The preamble to the BOU Act references fostering price stability and ensuring "a sound financial structure" though "the BOU does not have an explicit mandate to undertake macroprudential policy." - Proposed amendments of the BOU Act will: - "provide the central bank with an explicit financial stability mandate" - provide "statutory empowerment of the FSCB, in charge of conducting macroprudential policies." ### Institutional arrangements and governance - BOU discloses committees in charge of macroprudential policies: - Financial Stability Committee of the Board (FSCB): "oversees approving regulations and macroprudential policies frameworks." - Financial Stability Committee (FSC): "implements the macroprudential policies approved by the FSCB, monitors and reviews the policy instruments and provides recommendations for policy changes." - Financial Sector Stability Forum (FSSF): "coordinates the actions of the various institutions that have a mandate over regulation and supervision of the financial sector." - FSSF membership includes: Ministry of Finance, Planning and Economic Development; Bank of Uganda; Insurance Regulatory Authority; Capital Markets Authority; Ugandan Retirement Benefits Regulatory Authority; Uganda Deposit Protection Fund; Uganda Microfinance Regulatory Authority. - FSSF primary objective: "coordinate the actions of the various institutions that have mandates over regulation and supervision of the financial sector, identify risks and evaluate vulnerabilities to the stability of the financial sector." ### Transparency, disclosure, and communication of macroprudential policy - Current disclosures and publications: - BOU communication includes website content and "regular publications" recognizing macroprudential policy as a key objective; BOU describes engagement and "BOU's Role in Financial Stability." - Active engagement with financial institutions via direct circulars, discussion forums, MOUs, publication of the sublegal acts and the methodological framework. - Public engagement mainly through the annual Financial Stability Report (FSR) and the quarterly Financial Sector Reviews (QFSR). - Gaps and inconsistencies: - "The interim macroprudential policy framework of BOU identifying the macroprudential objectives and the policy instruments, is not disclosed." - BOU "does not release periodical information on the meetings of the FSCB, FSC and FSSF." - Amendments to empower the BOU or changes to relevant macroprudential sublegal acts "are not disclosed for public consultation." - Disclosure of specific instruments is inconsistent: - Statutory instrument supplement no. 46/2020 is disclosed (capital buffer requirement and DSIB framework). - "The framework for the countercyclical capital buffer is not disclosed." - Caps on Loan to Value (LTV) ratios for residential mortgages and land purchase are disclosed through the annual FSR. - Disclosure timing issues: - DSIB list is released through the FSR rather than immediately after the Governor's circular. - "The relevant level of the capital buffers for each of the DSIBs is not disclosed." - Methodology for determining the rate of the countercyclical capital buffer "(set at present at 0%)" is not disclosed, nor is the timeline for its announcement. - No mapping of macroprudential policy instruments to individual systemic risks and no explanation of transmission channels. - Recommendations (comments from review): - Disclose the macroprudential policy framework, listing objectives mapped to relevant policy instruments. - Formally communicate existing macroprudential policies by disclosing relevant sections of the policy framework already covered by BOU policy decisions. - Publish minutes for relevant financial stability committees to explain rationale and contributions to policy development. - Enhance disclosure of FSSF deliberations and coordination among regulators to better manage systemic risk. - Adopt timely and uniform disclosure practices, e.g., regular press releases or dedicated policy information on the website immediately following circulars. ### Supporting analysis and data disclosure (Principle 2.5.3) - Current analytical disclosures: - FSR provides an "annual Review of the risks of the financial system." - For banking: Systemic Risk Dashboard and a table of the FSI are included. - Other sectors are "briefly discussed" with inputs from relevant regulators (capital markets, retirement benefits, insurance). - QFSR provides status of macroprudential instruments, timing and expected duration, banks' capacity to comply, expected regulatory changes, and examples of policy analysis. - Review findings: - FSR provides forward-looking guidance and expected regulatory changes "with no insight provided on the rationale behind the change." - BOU statistical segment does not incorporate regular disclosure of the FSI. - "Overall, there is no mapping of the macroprudential policy instruments with individual systemic risks, and no explanation is given on the transmission channels of the policy instruments and how the instrument will mitigate systemic risk." - Recommendations: - Regularly disclose the FSI outside of the FSR as part of statistical and financial stability website sections. - In the macroprudential policy framework, summarize each policy decision in place, the benefits of mitigating the specific systemic risk, the relevant instrument used, and the reasoning behind policy changes. ### Emergency Liquidity Assistance (ELA) and lender-of-last-resort (Principle 2.7) - Legal and operational context: - Article 29, e and f of the BOU Act allow BOU to "extend advances to financial institutions with a set of rules." - Ongoing BOU Act revision aims to "clarify BOU’s role as lender of last resort vis-à-vis that of providing emergency liquidity assistance." - Proposed provisions intend to separate: - Lender of Last Resort (LOLR): "for a purely credit-driven need and attracts more stringent conditions" - Emergency Liquidity Assistance (ELA): "provides short term Emergency Liquidity Assistance, which serves as both a monetary policy management tool and a safeguard to the stability of the financial system for preservation of public confidence." - Under ELA, BOU may grant loans/advances to a viable and solvent financial institution and/or Microfinance Deposit-Taking Institutions (MDIs) "at a rate of interest and against eligible government securities or such other collateral as may be determined by the board." - Board of Directors ratified the BOU Emergency Liquidity Assistance (ELA) Framework to serve as the LOLR facility for Supervised Financial Institutions. - Recent reforms: - Lombard Window split into two facilities: - (i) Standing Lending Facility for short term liquidity (monetary policy instrument), operationalized in July 2020. - (ii) Emergency Liquidity Assistance (ELA) facility for the LOLR function (financial stability). - March 2021 QFSR noted: "the April 2021, BOU Board decision approving the Emergency Liquidity Assistance (ELA) facility to support viable banking institutions that may face liquidity stress, under the Lender of Last Resort (LOLR) function." - Operational framework for ELA has been drafted but "has not yet been published." - Interim arrangements: - ELA function exercised under the "COVID19 Liquidity Assistance Program (CLAP) designed in July 2020" until a new regulation is published. - CLAP discloses different forms/operations (bilateral and market-wide liquidity support), institutional eligibility, and the central bank’s decision-making process. - CLAP "does not mention the disclosure policy," but data are published in the quarterly financial stability review (example: September 2020). - CLAP "does not foresee enhanced supervision power for the Central Bank or a requirement for a funding/recovery plan." - Review conclusions and recommendations: - BOU discloses basic ELA features and distinguishes bilateral vs market-wide support; institutional eligibility is clear in CLAP. - General rules do not include supervisory intrusion or explicit powers for enhanced supervision and early intervention. - Recommendation: publish the new Operational ELA framework (once approved) on the website as it will include rules and parameters expected in an ELA, including rules regarding enhanced supervision and disclosure policy. ### AML/CFT supervision and internal controls (Principle 2.10) - Scope of AML/CFT supervision: - BOU responsible for licensing, regulation, and supervision of financial institutions authorized in Uganda, including AML/CFT supervision. - Supervised entities include commercial banks, credit institutions, MDIs, forex bureaus, money remittances, licensed payment service providers and payment system operators (including mobile money service providers (MMSPs)). - Legal basis and publication gaps: - General supervisory powers derive primarily from Article 79 of the Financial Institutions Act, as amended in 2016, and implementing regulations such as the Financial Institutions AML Regulations 2010. - Supervisory powers for MDIs and MMSPs set out in the MDI Act 2003, the National Payment Systems Act 2020 and its implementing regulations from 2021 (preceded by Mobile Money Guidelines 2013). - These legal instruments and guidelines are available on the BOU website at Bank of Uganda | Acts and Regulations. - AML/CFT specific powers guided by the AML Act 2013 and Regulations 40 and 46 of the AML Regulations 2015. - While the Act is available on the BOU website, "the regulations are not." Also, "the Anti-Terrorism Act has not yet been published." - Disclosure and operational issues: - "The BOU does not disclose its policies and powers for AML/CFT supervision." - Limited BOU experience in dedicated AML/CFT supervision; historically focused on prudential supervision with little AML/CFT focus. - CFT supervisory powers of the BOU "have yet to be clarified, as the relevant legal framework is not yet published." - Cooperation with Financial Intelligence Authority (FIA): - FIA created in 2014 (AML Act 2013); FIA "does not have direct supervisory powers" but receives, reviews and disseminates suspicious transaction reports and can provide guidance (Article 20 of the AML Act). - "The extent of the cooperation between the BOU and the FIA in the discharge of their respective AML/CFT functions is not elaborated on the BOU website." - "There is currently no inter-agency Service Level Agreement or Memorandum of Understanding on information sharing." - Reform context: - External designation: Uganda was designated in February 2020 "as a jurisdiction with strategic AML/CFT deficiencies by the Financial Action Task Force (FATF)." - This prompted legal, institutional, and operational changes; an action plan by the Government of Uganda with FATF includes aspects relating to BOU supervisory powers and activities. - Internal AML/CFT controls: - Internal controls of BOU commercial activities supervised by the Risk Management and Audit Department. - Authorities stated a new policy for internal AML/CFT controls "has been created and is pending approval by the BOU Board." - Review findings: - "The BOU does not disclose an overview of its AML/CFT supervisory powers." - Published legal framework on the website is incomplete and "is not explicit on the AML/CFT powers of the BOU." - BOU "does not disclose a description of its internal AML/CFT control framework relating to its activities/services that may give rise to ML/TF risk." - Recommendations: - Publish AML Implementation Regulations 2015 and the Terrorist Financing Act on the website as part of the legal framework underpinning AML/CFT supervision. - Disclose background on BOU AML/CFT supervisory powers where not apparent from the legal framework. - Provide further details on cooperation with the FIA and division of responsibilities. - Adopt the pending internal AML/CFT controls and publish an overview of the internal AML/CFT controls on the website. ### Consumer protection (Principle 2.11) - Current status: - "The underlying policy basis for consumer protection is not complete" because the legal basis for various efforts has not been fully provided regarding institutions subject to the Financial Institutions Act of 2004, as amended. - Implication: - Without a policy/legal basis under the Financial Institutions Act, "questions regarding the mandate, scope and enforcement mechanisms can arise." *Source: 1ugaea2023002 - Section 4 of the BOU Act and section 27 and 131 of the FIA implicitly lays the* ### Section 65 (Consumer protection in payment system) of the National Payment Systems ### Section 65 (Consumer protection in payment system) of the National Payment Systems Act 2020 (NPSA) ### Consumer protection framework and mandate - Section 65 mandates that a payment service provider (PSP) shall comply with the requirements of consumer protection as may be prescribed by the central bank. - Consumer protection is guided by the principles: transparency, accountability, data protection, protection against unfair trade practices that disenfranchises the consumer, full disclosure of information, confidentiality and dispute resolution. - A PSP shall refrain from misleading a consumer in advertising or in offering a service that is not approved under the Act and can be subject to a fine or imprisonment. - The Bank of Uganda (BOU) enforces the NPSA with a view toward fostering financial sector stability and growth. - The BOU provides guidance for all institutions it supervises; other supervisors have issued their own guidelines. ### Scope and limitations - The basis for consumer protection is clearly established in the National Payment Systems Act of 2020, but only for payment service providers. - Review Not Applicable: the source states “The reason there is no Review is because the range of practices has not been established yet, thus no review is provided.” --- ### Pillar III — Central Bank Operations ### Principle 3.1 Monetary Policy: Operational framework and instruments - Operational target: the 7-day interbank rate. - Key monetary policy instruments published by BOU: repurchase agreements (Repo) and reverse Repo. - Operational mechanics: BOU controls liquidity through repo and reverse repo auctions to influence the 7-day interbank rate to within the range of the CBR, which is set by the MPC with a corridor of ±2 percentage points. - If the 7-day interbank rate is towards the upper bound, BOU will supply liquidity through reverse repo operations. - If the 7-day interbank rate is towards the lower bound, BOU will withdraw surplus liquidity through repo operations. - BOU absorbs liquidity by issuing term deposits (or BOU bills). - Published materials: general guidelines (Bank of Uganda | Auction procedures and Guidelines), BOU Term Deposit Instrument Prospectus for each auction, and reports on use of repos, reverse repos, and BOU bills. - Domestic Money Markets Reports include: domestic money market liquidity position, all of the previous day’s interbank money market transactions (anonymized), maturity profile of the monetary policy instruments over the next six months, and daily secondary market quotes. - Lesser-used instruments: Lombard and rediscount windows (website: Bank of Uganda | Financial Markets). - Role of reserve requirements: not publicly discussed except in a working paper (WP: Institutional Environment and the Microstructure of the Interbank Market). Review: Expanded — “The set of monetary policy instruments is disclosed to the public together with a clear definition of the operational target. The relationship between instruments and operational target is explained as well. On the contrary, the role of reserve requirements is disclosed.” Comment: BOU could disclose additional information on the impact of reserve requirement on liquidity conditions and thus on monetary policy implementation. ### Principle 3.1.2 Coverage: Instruments characteristics and collateral - BOU publishes details on monetary policy instruments and a daily money market report. - Eligible collateral for standing facilities: government securities. - Terms and conditions of instruments communicated via circulars (access rights, procedures, terms, and conditions). - A 2019 working paper describes cash reserve requirement computation and role; BOU does not see reserve requirements as a monetary policy tool. - Reserve requirements information communicated via supervision circulars (Bank of Uganda | Supervision Circulars and Guidance Notes). Review: Expanded — “The central bank discloses the terms and conditions of different monetary operations. The eligible collateral is defined and published together with information on the reserve requirements.” Comment: Website could explain how open market operations are calibrated and report detailed characteristics (maturity, interest rate, auctioning method, collateral and haircuts, etc.) of each instrument. ### Principle 3.1.3 Access: Counterparties’ framework - All commercial banks can bid in auctions for BOU bills and have access to the Lombard and rediscount windows (Bank of Uganda | Financial Markets). - BOU publishes the list of commercial banks on its website (BOU | Licensed Commercial Banks - July 2020). Review: Expanded — “The list of eligible institutions, counterparties of monetary operations, and their respective access rights is published on the website and regularly updated.” Comment: To enhance transparency, the website could explicitly mention that all commercial banks have access to repo and reverse repo operations with the central bank. --- ### Principles 3.2–3.3: Cross-Border Financial Flows and Foreign Exchange Administration & Management ### Principle 3.2 Instruments and coverage (FEA and Regulations) - The Foreign Exchange Act, 2004 (FEA) and Foreign Exchange (Forex Bureaus and Money Remittance) Regulations, 2006 provide licensing, reporting requirements, remedial measures, administrative sanctions, and operational instructions for forex bureaus and money remittance businesses. - Article 28 of the FEA requires licensees to submit all reports on capital flows arising from any transactions, including overseas investment, ownership of shares in foreign companies and dividends from such investments to BOU. - Review: Core — “The FEA discloses the regulatory framework as well as the instruments used in the policy. This includes details on types of licenses/approvals, type of reports to be submitted to BOU, types of monitoring and enforcement instruments.” - Comments: Transparency could be enhanced by disclosing a list of possible instruments, regulatory framework hierarchy, a separate FX regulations section on the website, license requirements checklist, Personal Declaration forms for ‘Fit and Proper’ tests, and other relevant forms. ### Principle 3.3 Foreign Exchange Management: Instruments and market operations - BOU intervenes only in the spot market and only in the IFEM (Interbank Foreign Exchange Market). - Intervention channel: Reuters dealing (Refinitv). - FX interventions include direct interventions and targeted purchases for reserve build up via auctions in the spot market. - Communication and mechanics when building reserve: - BOU communicates intention to intervene through Refinitiv, indicating sale or buy side. - Reservation build-up via a rule-based intervention approach through a forex auction. - Auction frequency: daily, but BOU may cancel an auction based on prevailing market conditions; cancellation broadcast on the Refinitiv Dealing Screen. - Auction open to all banks in the inter-bank market but not mandatory to participate. - Minimum and maximum bid amounts per bank are communicated on Refinitiv. - Auction is carried out at 11:00 am and BOU communicates to the successful bidders by 11:15 am. - BOU provides minimal information to avoid rate manipulation; explained via a circular to IFEM participants. - Market conduct: The FX global code of conduct for IFEM market participants is used in Uganda (ACI FMA & Industry Codes | ACI Financial Markets Association (ACI FMA)). Each dealer must sign the Uganda Financial Markets code of conduct (COC is not available on website). Review: Core — “The central bank discloses the foreign exchange management framework of its operations, the markets in which it operates (e.g., spot and derivatives), and its framework for choosing institutions to transact with.” Comment: BOU could specify in the annual report that interventions in IFEM are in the IFEM spot market or make a clear disclosure of the instruments in the framework. --- ### Principle 3.4 Foreign Exchange Reserve Management ### Instruments, eligible asset classes and constraints - Section 31 of the Bank of Uganda Act stipulates acceptable asset classes/instruments for foreign reserves and requires maintaining a reserve of external assets at least equal to four weeks’ import requirements consisting of any or all of: - (a) gold coin or gold bullion; - (b) convertible foreign exchange in any of the following forms: - (i) demand or time deposits, money at call, notes and coins; - (ii) bills of exchange when they bear at least two signatures, of which one is that of a commercial bank and which have a maturity not exceeding ninety days exclusive of days of grace; - (iii) marketable securities of, or guaranteed by, foreign governments or international financial institutions; - (c) any external fund, facility or drawing rights, inclusive of the reserve tranche purchase from the International Monetary Fund, which the Minister, after due consultations with the bank, considers acceptable for inclusion. - Under the corporate governance section of the annual report, BOU discloses broad risk constraints used for reserve investments. Review: Core — “The broad disclosures on the acceptable asset classes, instruments and constraints are disclosed by the central bank in the Bank of Uganda Act and Annual Report.” Comment: Transparency could be enhanced by publishing the Foreign Exchange Reserves Management Policy of 2019 and excerpts of the investment policy (objectives, selection criteria for asset classes, expanded list of allowable instruments, investment horizons, and more details on constraints). ### Counterparty selection and assessment of adequacy - BOU discloses broad credit rating and market exposure criteria for selection of counterparties under the corporate governance section (market risk and credit risk) of the annual report. - Notes to the financial statements disclose markets of exposure during the year. - BOU discloses reserves adequacy as part of quarterly State of the Economy reports and its annual report; Section 31 of the Bank of Uganda Act stipulates the broad criteria for determining adequacy. - Review: Core — “The Bank discloses broad criteria restrictions for selection of counterparties and markets, without providing for the detailed criteria.” - Comment: Transparency could be enhanced by including a dedicated website section on Foreign Reserves with information from the Foreign Exchange Reserves Management Policy of 2019, including detailed criteria to select service providers (section 3.9). *Source: Section 65 (Consumer protection in payment system) of the National Payment Systems Act 2020 and related sections on central bank operations provided in the supplied IMF document.* ### 31. A discussion on liquidity arising from its investment activities is presented in the ### 31. A discussion on liquidity arising from its investment activities is presented in the Annual Report. ### Financial Stability Reviews and Stress Testing - BOU prepares and publishes the Quarterly Financial Stability Review (QFSR) and the annual Financial Stability Report (FSR). - Reports provide Review of risk to financial stability, outlook, and key vulnerabilities; macro stress test results assess banks’ solvency position. - During 2020, BOU tested banks’ resilience to deterioration of their loan portfolio subject to the credit relief measure; updated through the 2021 QFSR. - QFSR includes short explanation of quarterly run stress test results and selected set of FSI for credit institutions. - Disclosure practices and methodology: - Annual stress test exercise is disclosed with a short explanation of aim, baseline and adverse scenarios, and aggregated results. - Methodology of annual and quarterly stress test framework is not disclosed; no public explanation on risks covered, shock magnitudes, or adequacy of the 12 months horizon. - Bottom-up stress test scenarios communicated via circulars to banks; limited public information on size of shocks, methodology, and risks assessed. - Coverage: - Annual FSR disclosed that stress test covers the whole banking sector. - List of banks published on BOU website as part of Supervision Directorate information. - Stress test results are disclosed on aggregated terms; no indications of capital shortfalls by banking group or anonymous individual-bank results. - BOU will run bottom-up stress test only for DSIBs as communicated in the 2021 QFSR; list of DSIBs identified in previous FSR. - Only 4 banks are identified as DSIBs. - Use of results: - FSR discloses that stress test aims to evaluate solvency position across scenarios. - No public indication of follow-up steps if baseline indicates undercapitalization or if adverse scenario materializes; no clarity on how results are used to develop mitigating policies. - Comments / recommendations: - Increase transparency on stress test methodology, key risks evaluated, and more granular publication of results (for example, by group of banks). - Publish a dedicated report on bottom-up stress test methodology and results to educate the public and improve confidence. ### Macroprudential Policy Implementation - Instruments in place: - Caps on LTV on foreign currency loans effective since May 2016; revised June 2020 (increasing cap ratio for residential mortgages and land purchase loans). - Limits on foreign currency loans maturity. - LCR requirement in place since 2014. - Limits on loan to deposit ratio in foreign currency in place since 2010. - Forward looking loan loss provisioning requirement since 2018. - Capital buffers (systemic risk capital buffer, countercyclical capital buffer). - Limit on leverage ratio in place since 2020. - Limits on direct exposure to other banks to mitigate interconnectedness risks. - Framework and communication: - Interim Macroprudential Policy framework drafted since 2013; methodology defines intermediate targets mapped to instruments; policy is not publicly disseminated. - Macroprudential decisions communicated through circulars to banks; website discloses sublegal acts and methodological frameworks and releases of FSR and QFSR. - Website not regularly updated with changes in framework; sublegal acts or changes in coordination mechanism not timely released. - BOU does not publish regulatory acts for public consultation during drafting phase. - Scope and enforcement: - Regulation on Capital Buffers and Leverage ratio applies to all financial institutions under BOU mandate, though only 4 banks are identified as DSIBs without transparent disclosure of evaluation outcome. - Macroprudential tools communicated directly to banks via circulars; no public information on scope of entities for many tools. - Legal framework provides adequate enforcement mechanisms; sublegal acts and methodological frameworks approved by FSCB are publicly disclosed and communicated through official gazette and website. - Review findings: - BOU does not disclose the full design of the macroprudential framework, intermediate targets, instruments and outcomes to external stakeholders. - Public communication is limited to past actions disclosed in FSR and QFSR and periodic FSI data. - Comments / recommendations: - Centralize and publish macroprudential policy framework and decisions in the financial stability section of the website. - Design uniform approach to publication of policy decisions and list of institutions subject to macroprudential measures. - Disclose outcome of DSIB evaluation and clarify scope of macroprudential mandate. ### Emergency Liquidity Assistance (ELA) - Bilateral ELA under COVID-19 Exceptional Liquidity Assistance Facility (CLAP): - BOU disclosed in Sept 2020 QFSR: “BOU extended liquidity support to two banks – one accessing USH.20 billion from the COVID-19 Exceptional Liquidity Assistance Facility (CLAP) in June 2020, and the other borrowed USH.40 billion from the Lombard Window in July 2020. Both banks took steps to enhance their liquidity buffers and have since fully paid back the borrowings from BOU.” - No market-wide liquidity support provided so far. - Review: - Bilateral ELA information disclosed only after the financial stability risk has passed; released in quarterly financial stability review. - Under new ELA framework, no ELA provided as operational guidelines not yet published; new guidelines maintain confidentiality and disclose ELA provision with a lag. - Comments: - Disclosure practice is to report ELA after immediate risks subside; maintain confidentiality while mindful of financial stability concerns. ### Financial Integrity: AML/CFT - Public disclosure and supervisory activities: - BOU does not publicly disclose information on external and internal AML/CFT processes and resources in annual reports or on the BOU website. - Until end of 2021, no AML-specific on-site inspections; AML components were part of general supervision (operational risk). - Risk-based supervision of AML/CFT matters was not in place. - Internal resources and documentation: - BOU has an internal AML Manual produced in 2015 outlining procedures and templates covering seven areas: customer due diligence, record keeping, transaction monitoring and suspicious transaction reports, politically exposed persons, AML/CFT compliance function, wire transfers, and correspondent banking. - AML Manual or overview is not publicly available. - Dedicated AML/CFT team formed end of 2021; currently comprises four officers out of targeted six positions. - Two AML/CFT reviews carried out by the team (except for two pilots). - Team is working on an AML/CFT plan as part of overall AML/CFT Strategy of Uganda. - Internal AML/CFT team previously had one officer who also had other duties. - New internal AML/CFT policy prepared and subject to Board discussion and approval; includes provisions for review by an independent third party. - Review status: Not Implemented - Comments / recommendations: - Publish an overview of AML/CFT supervisory activities and resources in annual reports and/or on the website. - Disclose resources dedicated to internal AML/CFT controls (e.g., organizational chart). ### Consumer Protection - Framework and instruments: - Financial Consumer Protection Guidelines, 2011 (FCPGs) aim to: - Promote fair and equitable financial services practices; - Increase transparency to inform and empower consumers; - Foster confidence in the financial services sector; - Provide efficient mechanisms for handling consumer complaints. - FCPGs apply to all institutions supervised by BOU; other supervisors have sector-specific guidelines. - Complaints mechanism protocol includes a 14-day period for resolution to customer’s satisfaction. - Framework for Financial Literacy and Financial Consumer Protection exists; BOU coordinates under National Financial Inclusion Strategy and Strategy for Financial Literacy in Uganda. - Financial Capability Survey 2020 completed; results to be disseminated to inform policy development. - Public awareness materials (brochures, posters) available on website; translated into multiple languages. - Webpage dedicated to financial consumer protection with links to FCPGs, Q&A brochures, key facts documents. - Financial Consumer Empowerment Mechanism (FCEM) established November 2017 as single point for information, inquiries, complaints handling and resolution. - Online complaints form available; BOU published working paper on COVID-19 impact on consumer protection. - Monthly meetings with CEOs of supervised financial institutions organized by Uganda Bankers Association discuss consumer protection. - Outcomes: - Annual report 2021: Complaints received totaled 341 for year ending June 2021; 322 resolved and 19 pending. - Complaints down from 493 previous year. - Nearly 37 percent of complaints for calendar year 2020 related to ‘mobile money/mobile banking’; interest fees and other charges accounted for 10 percent. - Review: Not Applicable (range of practices not established) - Comments: - BOU has developed numerous consumer protection operations, notably FCEM and accessible online complaint mechanisms. ### Monetary Policy Outcomes and Operations - Governance and accountability: - BOU Act - Chapter 51, Article 49 requires annual report to Minister of Finance within three months from end of fiscal year; annual report is also published on BOU website. - Annual report discusses activities, operations, and monetary policy decisions. - Governor and BOU representatives appear before legislative committees; interactions recorded and potentially televised. - Policy disclosure and forecasting: - BOU releases periodic documents on progress toward achieving a 5 percent inflation target over the medium term and main risks. - Immediately after each MPC, BOU issues an MPS and Governor holds a press conference. - Monetary Policy Report (MPR) published every two months; presents baseline and alternative scenario inflation forecasts and balance of risks. - BOU does not publish the models used to forecast inflation but publishes broad economic data informing decisions. - BOU has expressed intention to publish the model used to inform monetary policy decisions and produce forecasts. - Operations transparency: - BOU publishes daily money market reports: liquidity conditions, interbank market rates and transactions, monetary policy operations. - Reports show overall excess reserves, expected liquidity injections and withdrawals, weighted average interbank overnight and 7-day rate (operational target), compared with CBR (policy rate), and detailed account of each transaction (time, rate, tenor). - Outstanding volume of each monetary policy instrument reported to the MPC and shared with media and banking association, but not made available on BOU website. - Review: Expanded - Comments / recommendations: - Consider publishing daily outstanding volumes per instrument, aggregated bank balances (reserves), and realized autonomous factors. ### Foreign Exchange Management and Reserves - Accountability and decision-making: - BOU discloses accountability to public, Minister of Finance, and Parliament per the BOU Act (Art 49). - Bi-monthly MPC reports explain exchange rate regime (flexible), evolution, Balance of Payments impact, and interventions. - Example: MPR April-2020: “BOU sold US$ 198.9 million during this period... BOU will intervene in the foreign exchange market to smoothen volatility while letting the shilling adjust to external pressures.” - Policies and role of FX management: - In context of IT and floating exchange rate, FX intervention used to reduce excessive volatility affecting inflation expectations and uncertainty, and to build reserves. - Each FX intervention summarized in bi-monthly MPR with explanation of nature of flows impacting FX market. - Operations disclosure: - Data on reserve accumulation, FX intervention and targeted sales systematically reported in bi-monthly monetary policy statements. - MPR April-2020: “BOU purchased US$ 2 million on a gross basis for reserve build-up in March 2020. This amounted to a net sale of US$ 204.86 million, taking into account the intervention sales amounting to US$ 198.9 million and targeted sales to Uganda Electricity Transmission Company Limited of US$ 7.96 million.” - Annual report FY 2020/21 p.32: “BOU purchased a total of USD 723.5 million, of which USD 552 million was for reserve build up. The remaining USD 171.5 million went towards interventions to stem volatility in the IFEM, as well as towards targeted purchases.” - Central bank publishes aggregated intervention data with a predefined time lag and two-month frequency. - Reserve management governance and reporting: - Foreign Exchange Reserves Management Policy Section 7 sets institutional framework and governance roles; corporate governance disclosed in annual report. - FY 2021 Financial Statements (Note 4 Financial Risk Management) disclose amount, composition, profit/loss, and risks arising from foreign exchange reserves; Note 13.2.2 discloses return on foreign assets and expenditure associated with reserves management. - Level of foreign reserves assets and liabilities published at high-level in annual report. - Review: - Expanded for FX intervention and operations; Core for reserve governance and annual publication of reserve levels. - Comments / recommendations: - Publish extracted Section 7 of Foreign Exchange Reserves Management Policy to enhance clarity on institutional responsibilities. - Improve disclosure of liabilities, short-term drains, and commitments on a predefined schedule with a lag. ### Macroprudential Policy Outcomes and Accountability - Accountability framework: - BOU Act does not provide clear explicit legal financial stability mandate; accountability on macroprudential policies is based on central bank function to maintain monetary stability and contribute to stable economy and well-supervised financial system. - Annual report and FSR support accountability. - Publication of macroprudential policy framework by FSCB foreseen within 2023. - Evaluations and disclosures: - BOU monitors threats to financial stability and evaluates key indicators related to relevant risks; FSR discloses some information on impact of measures related to capital buffers. - No disclosure of impact of other measures such as LTV ratios. - BOU does not conduct ex post evaluations about impact of policy decisions; analysis focuses on solvency ratios and risks. - Comments / recommendations: - An explicit macroprudential mandate and disclosure of framework, intermediate targets and instruments will enhance accountability. - Disclose ex-post evaluations of policy impacts (e.g., effects of LTV caps on credit market and real estate). ### Central Bank–Government Relations - Legal and institutional basis: - Relationship detailed in Bank of Uganda Act, Section 4 subsection (2) and Section 32: - BOU shall act as financial advisor to the Government and manager of public debt. - Minister may direct the bank to render advice; bank shall advise and inform Government. - Bank shall render services to the Government as may be determined by the Minister. - Government shall seek advice from bank on monetary policy; bank duty to formulate monetary policy and advise Government. - Government shall consult with the bank on domestic or foreign credit requirements. - Public Management Act of 2015 prescribes process for management of petroleum revenue in the Petroleum Fund; MOFPED maintains two accounts at BOU and oversight of transfers and disbursements; level of petroleum fund deposits detailed regularly in annual report. - Exchange of information: - MOU exists between Bank of Uganda, Capital Markets Authority, Insurance Regulatory Authority, and Uganda Retirement Benefits Regulatory Authority detailing collaboration, supervision, information sharing and terms for Financial Sector Regulators Forum (FSRF). MOFPED is not a signatory. - MOU not disclosed publicly by BOU; minutes of meetings not disclosed. - Profit distribution: - Section 16(1) of the Bank of Uganda Act states profits or losses shared between Bank of Uganda and the Government in respective portions of 25 and 75 percent after specified adjustments and provisions. *Source: IMF country module content for Uganda (excerpts from the assessed chapter).* ### Section 16 further notes that in determining the profits and loss at the end of each ### 1ugaea2023002 - Section 16 further notes that in determining the profits and loss at the end of each ### Profit distribution and accounting (BOU Act Section 16 and related) - Section 16 requires that, in determining the profits and loss at the end of each financial year, the accounts shall clearly distinguish profits or losses arising from the normal operations of the bank and those resulting from profits or losses from exchange fluctuation (sub-section 16(2)). - The BOU Board may determine that the whole of the net profit of the BOU be paid into the Consolidated Fund if, at the end of the fiscal year, the amount of money in the General Reserve Fund is twice or more than the amount of the paid-up capital of the BOU (sub-section 16(3)). - The BOU may, after consultation with the Minister of Finance, retain from money payable into the Consolidated Fund under this section any amount of money as the BOU Board may determine in satisfaction or reduction of any amount of money due to the bank by the Government (sub-section 16(4)). - For the past few years, the BOU has not been providing a profit distribution to the Government, as outlined in Section 16 of the BOU Act, because the core capital position of the BOU has been below the minimum required capital level. - As required under Section 14(4) of the BOU Act the Government has furnished securities to the bank to make good on this impairment; these recapitalizations are described in the financial statements each year (footnotes 7, 46.6 for the 2021 financial statements). No other announcements or press releases have been released with regard to these recapitalizations, but the Parliament approves them, and this is a public process. - Comment/recommendation: The BOU could expand disclosure by publishing the noted MOU and the minutes of the FSRF meetings, with redactions as appropriate or with a time lag. Alternatively, agreements or meetings could be regularly announced in press releases. ### Financial transactions and fiscal agency (BOU Act Section 4 and operations) - Section 4 (functions of the BOU) in subsection (2) specifies that BOU shall: - (d) be the banker to the Government; - (e) act as financial advisor to the Government and manager of public debt; - (g) where appropriate, act as agent in financial matters for the Government. - Financial transactions between the BOU and the government are codified in the BOU Act and are detailed on the Bank of Uganda website (Financial Markets in Uganda page), including: - prospectus for Government of Uganda bond issuances, auction procedures and guidelines, an issuance calendar for bills and bonds, term deposit instrument guidelines and prospectus, daily money market reports, exchange rates, rules governing Lombard and the rediscount window, among other operational details. - Specialty funds and facilities: - Agricultural Credit Facility (ACF): created during October 2009 by way of an MOU between the BOU, MOFPED, the Uganda Bankers Association, the Uganda Development Bank and other select institutions. The MOU is readily available on the BOU website. The ACF is discussed regularly in the BOU Annual Report and the level of managed funds is highlighted in the notes to the financial statements (note 39 in the 2021 report). - Small Business Recovery Fund (SBRF): created in November 2021 to provide loans to small businesses adversely impacted by the pandemic. The BOU is Fund Administrator on behalf of the Government of Uganda. Information on the SBRF was recently made available as part of a workshop; this workshop is available on the BOU YouTube channel. - Review assessment: Comprehensive — the BOU Act codifies transactions and the Financial Markets page provides extensive operational detail. - Comment: Disclosure of recapitalization events has been limited to financial statement footnotes; broader communication (e.g., press releases) could enhance transparency. ### Domestic financial agencies, MOUs, and information sharing (FSRF and DPF) - The Financial Sector Regulators Forum (FSRF) is the primary platform for coordination between the BOU and domestic financial agencies. An MOU updating a previous version was agreed in December 2017 (previous version from October 2007). Signatories for the 2017 MOU include BOU, Capital Markets Authority, Insurance Regulatory Authority, and Uganda Retirement Benefits Regulatory Authority. - The content of the 2017 MOU and minutes of FSRF meetings are not disclosed publicly. - The Financial Institutions (Protected Deposit) Instrument, 2019 and the Financial Institutions Deposit Protection Fund Regulation, 2019 are the enabling Act and regulation for the Deposit Protected Fund (DPF). Regulation 16 of the Act allows disclosure of information if it is in performance of a duty or exercise of function under the Act or Regulations. These instruments are not available on the BOU website but are on the DPF website. - The BOU and DPF have signed a bi-lateral memorandum of understanding on cooperative efforts as detailed in the Annual Supervision Report of 2017. - Review assessment: Core — cooperation and information sharing are established via MOUs, but key MOUs are not available on the BOU site. - Comment/recommendation: It is advised that the MOUs be made public by the BOU and that the BOU issue periodic press releases coinciding with meetings or referencing ongoing activity in the periodic FSR. ### Macroprudential policy and financial stability arrangements - Legal and institutional framework: - The BOU Act specifies authority to supervise, regulate, control and discipline financial institutions. - The BOU website hosts a macroprudential page and materials including the annual financial stability report and quarterly financial stability review; content on financial crisis management, exceptional liquidity assistance, enforcement and corrective actions, bank resolution, deposit protection and interagency coordination; and payments oversight information. - Committees and coordination: - Two financial stability-related committees: an internal BOU financial stability committee (meets quarterly) and a multi-lateral financial sector surveillance committee (FSSC) that meets twice a year based on the 2017 MOU. The FSSC signatories include Bank of Uganda, Capital Markets Authority, Insurance Regulatory Authority and Uganda Retirement Benefits Regulatory Authority. The Ministry of Finance, Planning and Economic Development (MOFPED) also participates and can, at times, chair the FSSC. - The multi-lateral committee has addressed the framework for identification, regulation and supervision of domestic systemically important banks (DSIBs) and is working on development of a crisis management plan. - The capital buffer regulation (2020) is disclosed on the BOU website and is an example of an arrangement to restore or maintain financial stability. - Review assessment: Core — legal framework and website content address macroprudential policy and actions. - Comments/recommendations: - Committees could announce work regularly at the topical level (minimizing confidential detail) to enhance disclosure. - Website links and content are sometimes out of date or inconsistent and are not always centralized; consolidating links and updating content would improve clarity. - Disclosure of the FSSC MOU would enhance transparency. ### Foreign relations, regional initiatives, and other external interactions - Legal provisions: - Section 6 envisions on-the-ground presence outside Uganda via branches, agents and correspondents. - Section 29 envisions interactions through maintenance of accounts with central and other banks, acting as a correspondent, banker or agent for any central bank or other bank or international monetary authority established under Government auspices. - Regional and international engagement: - The Annual Report 2021 lists the East African Community (EAC) as a strategic partnership and notes the transition to a single currency by 2024 as a key initiative; other regional initiatives include the Monetary Affairs Committee. - The media center contains links to partner agencies (Central Bank of Kenya, Bank of Tanzania, Bank of South Sudan, and Banque de la République du Burundi). There are presently no MOUs between home-host authorities. - Review assessment: Core — BOU has authorities and reports provide details on interactions with foreign agencies. - Comment/recommendation: Disclosure could be enhanced by providing detailed terms and conditions of cooperation with foreign agencies. ### Relations with private and semi-public institutions; corporate social responsibility - Public-private partnerships and MOUs: - The Agricultural Credit Facility (ACF) MOU (October 2009) between BOU, MOFPED, Uganda Bankers Association, Uganda Development Bank and other institutions is publicly available on the BOU website and disclosed annually (note 39 in the 2021 annual report). - Corporate social responsibility: - Outreach programs are noted on the BOU website and in the Annual Report, including Ayivuni Health Centre III and Nakaloke Health Centre III. - Review assessment: Core — the BOU discloses the ACF MOU and annual reporting details; CSR activities are mentioned in the Annual Report. ### Appendix I — List of BOU Departments and External Stakeholders (as listed) - Bank of Uganda Senior Management and Staff: - Governor, Deputy Governor and Economic Advisor to the Governor - Members of Executive Committee (ExCom) - Members of the Board of Directors - Bank Secretariate (Board Affairs, Legal Affairs, and Communications) - Banking and Currency Management - Economic Research, and Statistics - Finance and Financial Reporting - Financial Markets - Financial Stability - Human Resources - Internal Audit - National Payment Systems - Non-Bank Financial Institutions - Petroleum Investment Fund - Risk and Compliance Management - Strategy and Quality Assurance - External Stakeholders: - Academia (Makerere University Business School and Markerere University) - ACI Financial Markets Association of Uganda - Media Representatives (Bloomberg, NTV Uganda and New Vision Uganda) - Ministry of Finance, Planning and Economic Development - Private Sector Economists - Think Tanks and Research (Financial Sector Deepening Uganda, Private Sector Foundation Uganda, Economic Policy Research Centre) - Uganda Bankers Association Executive Committee *Source: 1ugaea2023002 — excerpts from the supplied IMF PDF content.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1ugaea2023002.pdf_