Instruction Notes for the Compilation of the Quarterly Report on Country and Transfer Risk

BANK OF UGANDA: SUPERVISION DIRECTORATE 2022 1 INSTRUCTION NOTES FOR THE COMPILATION OF THE QUARTERLY REPORT ON COUNTRY AND TRANSFER RISK AUGUST 2022

BANK OF UGANDA: SUPERVISION DIRECTORATE 2022 2 Introduction The quarterly report on country and transfer risk provides data on foreign (non￾Ugandan) exposures of financial institutions in Uganda. The report contains two worksheets:

1. Values – on which financial institutions should report claims on foreign
   entities as per the categories specified.
2. Nostro balances – financial institutions provide a breakdown of the amounts
   held in nostro accounts
   The return should be submitted electronically via BSA by the 11th of the month following the end of the quarter. Details for completing the Report
3. Values Worksheet
   a) Exposure Categories
   i. Gross non-resident Interbank exposures (only nostro accounts)
   All balances in accounts that a financial institution holds with a non-resident financial institution including interbank time deposits or placements of deposits in a non-resident financial institution. Gross means that any amounts due to the non-resident financial institution should not be netted off.
   ii. Gross non-resident interbank exposures (excluding nostro accounts)
   This refers to amounts due as a result of any arranged loans to other foreign deposit taking institutions and other foreign financial Institutions. Gross means that any amounts due to the non-resident financial institution should not be netted off.
   iii. Loans to non-resident borrowers
   The total sum of outstanding loans, overdrafts, discounts and administered advances extended to non-resident borrowers.
   iv. Trade finance exposures

BANK OF UGANDA: SUPERVISION DIRECTORATE 2022 3 These include stand-by letters of credit, guarantees and performance bonds. These should be allocated to the country of the entity underlying the exposure not the location of the counterparty (beneficiary) of the exposure.
v. Investments in foreign subsidiaries
Include here the amount of capital invested in a subsidiary located in a foreign country as well as any subordinated debt or other debt instruments issued to the foreign subsidiary.
vi. Investments in foreign securities
Include here any investments in debt instruments issued by foreign sovereigns.
vii. Other non-resident exposures
Include all other exposures to non-residents which have not been included elsewhere. b) Capital Core and total capital figures should be input in the space provided (as above). The amounts should be equal to those reported in the Capital Adequacy return. Country risk exposure to a single country should not exceed 25% of total capital. Assets in correspondent bank accounts which are already subject to the limits prescribed in Regulation 8 of the Foreign Exchange Business Rules 2010 are excluded from this limit. Likewise, investments in foreign subsidiaries, which are fully deducted from capital are not subject to this limit. c) Country

BANK OF UGANDA: SUPERVISION DIRECTORATE 2022 4 Select the country from the drop-down list and input balances across the exposure categories.
2. Nostro balances worksheet
Only cells colored yellow should be filled out.
i. Total exposure in nostro accounts
This is the total of balances held in accounts that a financial institution holds with a non-resident financial institution including interbank time deposits or placements of deposits in a non-resident financial institution. It is picked from the sum of the gross nostro balances on the values sheet (cell C70).
ii. Exposure by Country
This section breaks down the total nostro exposure into different country exposures. Select the country, rating and rating agency from the drop-down list. The exposure limit is the financial institution’s internal exposure limit to that country.
iii. Corresponding bank Name
List all correspondent relationships held with financial institutions in that country.
iv. Rating
Select the rating of the correspondent bank from the drop-down list
v. Rating Agency

BANK OF UGANDA: SUPERVISION DIRECTORATE 2022 5 Select the name of the rating agency from which you have obtained the correspondent bank’s rating.
vi. Rating date
The date when the correspondent bank was rated.
vii. Exchange rate
The exchange rate for that currency at the reporting date.
viii. Currency
The currency in which the balances are held
ix. Amount in foreign currency
The amount in foreign currency held in that corresponding bank at the reporting date.
x. Shilling equivalent
This is computed by multiplying the amount in foreign currency by the exchange rate.
xi. Exposure limit
This is computed based on the limits prescribed in Regulation 8 of the Financial Institutions Foreign Exchange Business Rules 2010. The computation is based on the rating of the correspondent bank. Exposure limits for banks rated A and above is 50% of total capital; for banks rated B and above but below A is 30% of total capital and for banks rated below B and unrated is 20% of total capital. The total capital figure is drawn from Cell L11 on the values worksheet.