By Andrew Visper email@example.com
KAMPALA:. About 10 small banks in Uganda are at risk in the event five of their largest borrowers default on their loan obligations.
According to stress test conducted by the bank of Uganda (BOU) in June this year of 2019.
“Adverse credit portfolio concentration with in the smaller banks poses potential vulnerability which is depicted by the credit risk scenario installing default of the respective banks, largest five borrowers, Results of this stress test showed that the capital buffers of 10 Albert small, banks should be significantly eroded by such an event” and BOU.
The stress test results also show that banks of which one is a domestically systematically important bank (D-SIB) would not survive a five day bank run withdraw rates of five percent for demand and saving deposit and three percent for term deposit.
Those banks includes; the Standard Chartered Bank, Stanbic Bank and DFCU-BANK.
“The results showed that six banks (of which 1 is a D-SIB) would no be able to sustain their liquidity buffers over bfive day period of distress. This shows an overall deterioration in banks resilience, compared with the previous period of June of 2018, mainly due to low growths in liquid assets” Said bank of Uganda
The liquidity risk stress test assess each bank’s resilience to sudden adverse liquidity drow drowns without resorting to external liquidity support