The creation of a new platform that will enable more bank-to-bank trading has increased the industry’s protection against credit defaults. (Banks receive a new interbank system)
The Trade Clear platform, which enables banks to take out short-term credit in times of financial difficulty, is created by financial services company Frontclear. The platform is governed by the Bank of Uganda.
“The risk of interbank defaults will be covered by this umbrella guarantee arrangement. Frontclear would be prepared to repay the lender’s cash if a borrowing bank defaults on a secured transaction, according to deputy governor Michael Atingi-Ego, who presided over the signing ceremony at the Sheraton Kampala Hotel yesterday.
The interbank market is essential. Banks in need of short-term credit—generally not longer than seven days—use the interbank market. The interbank market also releases the central bank, which traditionally serves as the lender of last resort, from pressure to resolve the financial issues of commercial banks.
According to Charles Katongole of UBA’s Treasurers Forum, Tradeclear would increase the number of sources from which banks may get capital and enhance their capital management. Atingi-Ego emphasized that participation in the Trade Clear program is entirely up to the individual and is decided upon by financial institutions after careful consideration.
Sam Ntulume, executive director and chief operating officer of I&M Bank Uganda, commented on the developments and predicted that banks will provide customers with more competitive pricing and product options. According to a business release, at least 15 banks in Uganda have joined the Tradeclear platform. (Banks receive a new interbank system – celebrity jazz ug)