What you need to know:
- Bank of Uganda has, through improved credit risk mitigation, ensured financial stability but this, according to the African Financial Markets Index by Absa and Official Monetary and Financial Institutions Forum not provided enough ground for better ranking.
Uganda has missed out on an opportunity to break into the top three ranked financial markets in Africa despite regulatory reforms that promote financial stability.
Bank of Uganda has, through improved credit risk mitigation, ensured financial stability but this, according to the African Financial Markets Index by Absa and Official Monetary and Financial Institutions Forum not provided enough ground for better ranking.
The Index, whose objective since 2017 has been to shine some light on opportunities for investment, notes that Uganda has made it into the top five for the first time after earning points for progress in pillar six, which evaluates countries based on the enforceability of close-out netting rules and use of standard financial markets master agreements where Ghana, Nigeria and South Africa earned maximum points, while 12 countries scored minimum.
Close-out netting reduces credit exposures and shortfalls for banks and capital market intermediaries with proper enforceability, where Uganda hasn’t done a good job, promoting financial stability.
It also ensures that commercial transactions continue to be viable notwithstanding default due to adverse economic conditions.
However, to strengthen its netting-off and insolvency regulatory regime, Absa noted that Bank of Uganda was developing a separate and more explicit Betting Bill that will become the governing legislation for financial transactions documented under master agreements of the International Swaps and Derivatives Association and the Global Master Repurchase Agreement.
“Countries progressing with netting legislation are likely to move up this pillar in coming years,” reads the Absa Africa Financial Markets Index 2021
Already Ethiopia and Namibia are drafting legislation to cover netting-off enforceability.
Egypt is partnering with international financial institutions to develop the required regulatory regime for close-out netting. All this according financial market anaysts will require Uganda to up its game if it ever want to feature in the top three o the Absa Africa Financial Markets Index—ranking.