November 1, 2025

Introduction
The Bank of Uganda (“BoU” or “Central Bank”) issued the Guidelines on Financial Holding Companies, 2025 (“the Guidelines”), which took effect on 1 November 2025.

The Guidelines establish a regulatory framework governing the establishment, structure, governance and supervision of financial holding companies in Uganda. BoU’s intention is to strengthen oversight of financial groups and to close regulatory gaps that have arisen as financial institutions adopt non-operating holding company structures.

Like other entrepreneurs, banks often desire to sell part of their ownership as a means of diversifying their assets to reduce risk, increase capital or both. As such, banks are increasingly re-organizing to operate within conglomerates. Given that banks are regulated entities, it naturally follows that there should be corresponding regulatory oversight of the other institutions within the groups in which they operate. However, this remains a grey area, as even the Financial Institutions (Corporate Governance) Regulations do not provide for the regulation of non-bank entities within such groups.

In the past, BoU has issued no-objection approvals to institutions re-organising their corporate structures by introducing non-operating holding companies as majority shareholders.

Nonetheless, the absence of a specific supervisory framework for such holding companies created oversight challenges which the Guidelines seek to address.

The SM & Co. Banking and Finance team analyses these regulations considering the current trends and shares its thoughts on the same.

Salient features of the Guidelines
• A financial holding company (“FHC”) is defined under the Guidelines as a holding company registered and domiciled in Uganda, with at least 25% shareholding in one or more supervised financial institutions. The Guidelines mandate that the FHC should be a non-operating one, and expressly prohibit participation in the day-to-day operations of its subsidiaries.
• Where a FHC owns subsidiaries outside Uganda, BoU will enter into a memorandum of understanding with the host regulator to facilitate joint supervision.
• The establishment of a FHC is subject to a two-stage approval process; grant of a no-objection in principle; and a final no objection which is granted six (6) months after grant of the no-objection in principle. The approval is granted subject to fulfillment of capital requirements and other requirements prescribed under the Guidelines.
• Before commencement of operations, the FHC must demonstrate readiness to commence by submitting its internal control policy, enterprise risk management framework among others to BoU.
• The Guidelines require FHCs to adhere to sector regulations and ensure that they and all their subsidiaries are adequately capitalized at all times even after approval.
• The functions of FHCs are restricted to holding equity in subsidiaries. They may provide shared services such as information technology, company secretarial services, facilities, strategy or marketing support, but only with the prior written approval of the Central Bank and on an arm’s length basis.
• Prudential requirements are also introduced in the Guidelines. FHCs must maintain minimum paid-up capital as may be prescribed and must invest it in liquid assets.
• Insider-related transactions are capped at strict limits, and contingent liabilities on behalf of subsidiaries of a FHC are limited to 20% of the FHC’s shareholders’ funds unimpaired by losses.
• Existing FHCs that have previously received no-objection approvals are required to conduct a gap analysis within 180 days of the Guidelines coming into force. They must submit a detailed compliance report to the Bank of Uganda, identifying areas of full, partial or non-compliance, and providing timelines for achieving compliance. Full compliance is expected within one year of the issuance of the Guidelines (1 November 2026).

Policy context
The Guidelines derive their legal basis from the Financial Institutions Act, cap 57, which restricts the transfer or allotment of 5% or more of a financial institution’s shares without prior notice of no-objection from the Central Bank.

The Guidelines shall be read in conjunction with The Financial Institutions (Consolidated Supervision) Regulations, 2010.

The Guidelines align with the Basel Committee on Banking Supervision which recommends consolidated supervision of a bank as a unit together with other entities within the banking group and on a group-wide basis.

Regionally, the Central Bank of Kenya has issued prudential guidelines which establish a framework for regulation of financial conglomerates. South Africa’s Financial Sector Regulation Act also provides for the supervision of holding companies of financial institutions.

BoU’s approach therefore aligns Uganda’s prudential oversight with international and East African Community supervisory standards.

Emerging implications
The Guidelines address the long-standing risks associated with complex financial group structures that previously escaped direct oversight.

The Central Bank seeks to ensure that risks generated within one entity do not undermine the stability of the entire financial group.

From a market perspective, these Guidelines will influence how banks and financial institutions approach restructuring, mergers, and capital-raising strategies. The requirement for FHCs to maintain adequate capitalization and governance independence will likely increase compliance costs and require a review of intra-group arrangements.

While the move is progressive, questions remain about proportionality. Smaller domestic banks transitioning to holding company structures may face heavy regulatory and capital burdens relative to their scale.

Conclusion
The Guidelines represent a necessary development in Uganda’s regulatory architecture for financial groups. They impose clear legal and prudential standards on the establishment and operation of FHCs, and they give the Central Bank able tools for consolidated supervision.

Banking groups must now ensure that governance, capital, and risk management controls apply consistently across the entire group, not just at the licensed bank level.

¹ Core Principle 12 of the Core Principles of the Basel Committee on Banking Supervision

Disclaimer:
This publication is for general consumption and should not be taken and relied upon without seeking specific legal advice on any of the matters above.