The second area where the Bank of Uganda’s contribution to the recovery of the economy has been of critical importance is that of bank regulation. By the end of the 1980s, the banking system had shrunk, as a result of financial repression and macroeconomic instability, and some of the major banks were suffering chronic financial distress.
During the 1990s, distressed banks were restructured and restored to solvency or closed down. A new banking act was enacted in 1993 and the Bank of Uganda prioritized the prudential regulation of banks, with the safety of customers’ deposits being the foremost objective.