Recent minimum capital requirement reforms for commercial banks in Uganda: a case of Guaranty Trust Bank

Abstract

The study purposely investigated the relevance of the recent minimum capital requirement reforms for commercial banks in Uganda, with specific reference to Guaranty Trust Bank (U) Limited. The study was based on three objectives; to assess the factors influencing adherence to minimum capital requirement reforms in Uganda, to examine the challenges encountered by Guaranty Trust Bank (U) Limited in complying with minimum capital requirements and to recommend strategies for enhancing compliance with minimum capital requirements at Guaranty Trust Bank (U) Limited. The study employed a cross-sectional and descriptive research with a quantitative study approach which involved collecting numerical data from 70 respondents out of a sample of 73 GT bank staff, using a survey questionnaire. Data were analyzed using Stata Version 15. The study found that Guaranty Trust Bank (U) Limited’s compliance with Uganda’s minimum capital requirement reforms is shaped by a combination of internal strategic decisions and external regulatory conditions, with an overall mean of 3.59. Strategic decisions making (mean = 4.36), followed by market position (mean = 3.88), strategic adaptation (mean = 3.79), and recognition of structural disadvantages (mean = 3.80). The bank faced several challenges, including limited institutional scale, and unclear regulatory timelines (mean = 3.33), which hindered its ability to meet capital thresholds, resulting in a strategic downgrade to Tier II. To enhance compliance, the study identified strategies with an overall mean of 3.13, including collaboration with peer institutions (mean = 3.86), income diversification (mean = 3.51), strengthening capital buffers (mean = 3.22), and governance reform (mean = 3.18), while approaches like phased implementation advocacy (mean = 2.19) and leadership training (mean = 2.86) received lower support. These findings suggest that a multifaceted approach combining institutional reform, strategic flexibility, and sector-wide cooperation is essential for improving compliance outcomes. The study recommends that Guaranty Trust Bank (U) Limited enhance its compliance with minimum capital requirements by strengthening internal governance through improved risk management, audit, and compliance systems, supported by regular reviews and staff training. It also advises diversifying income sources into non-interest areas such as digital banking and trade finance to reduce reliance on traditional lending. Active collaboration with peer institutions and industry bodies is encouraged to promote shared learning and regulatory engagement.