3. Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated 10.03.14 No. 56 “On Approval of Regulations on the Procedure for Passing Licensing Procedures by Business Entities in the Field of Banking»;

4. Resolution of the Board of the Central Bank dated 04.04.14 No. 2570, registered by the Ministry of justice on 04.04.14 No. 2570 “On Approval of the Regulations on the Settlement and Clearing System of the Central Bank of the Republic of Uzbekistan»;

5. Regulation of the Board of the Central Bank of the Republic of Uzbekistan dated 30.06.2020 No. 3252 “On the Procedure and Conditions for Admission to Banking Activities”;

6. Regulation approved by the Resolution of the Central Bank Board dated 22.11.2008 No. 26/6, registered by the Ministry of justice on 23.12.2008 No. 1883;

7. Regulation approved by the Resolution of the Central Bank Board dated 14.08.2008 No. 17/3, registered by the Ministry of justice on 23.09.2008 No. 1858;

8. Regulation approved by the Resolution of the Central Bank Board dated 22.09.2018 No. 30/14, registered by the Ministry of justice on 25.10.2018 No. 3080;

9. Instructions on Bank accounts opened in banks of the Republic of Uzbekistan, approved by the Resolution of the Board of the Central Bank dated 16.03.2009 No. 7/2, registered by the Ministry of justice on 27.04.2009 No. 1948;

10. Appendix to the Resolution of the Board of the Central Bank dated 31.03.2018 No. 12/12, registered by the Ministry of justice on 12.05.2018 No. 3010;

11. Appendix to the Resolution of the Board of the Central Bank dated 13.07.2015 No. 14/5, registered by the Ministry of justice on 14.07.2015 No. 2696.

12. Banks in the Republic of Uzbekistan (hereinafter – the “RUz“) are created in the form of joint stock company (Regulation on registration and licensing of Bank activity to the Regulation of CBB, registered by MJ on 08.10.09 No. 2014).

The bank’s management bodies are the General meeting of shareholders, the Supervisory Board and the management Board. The General meeting of shareholders is the highest management body of a bank. Banks develop and implement measures to prevent corruption, rules of ethical conduct, and policies to prevent and resolve conflicts of interest.

The founders of a bank can be legal entities and individuals. Moreover, the state can be the founder and shareholder of a bank represented by the Ministry of Finance of the Republic of Uzbekistan, as well as other state organizations on the basis of Decisions of the President of the Republic of Uzbekistan. Enterprises and organizations with a state share in the authorized capital of more than 50% may not be founders and shareholders of a bank (article 12 of the Law of 25.04.96 No. 216-I).

1. Competent authorities

1.1 The Central Bank of the Republic of Uzbekistan

According to the Constitution of the Republic of Uzbekistan, the banking system is headed by the Central Bank of the Republic of Uzbekistan. The Central Bank is a state body that regulates the sphere of banking activities, as well as exercises the powers of licensing, regulation and prudential supervision (article 4 of the Law of 25.04.96 No. 216-I).

The Powers of the Central Bank of the Republic of Uzbekistan include (the Law of the Republic of Uzbekistan of 21.12.95 No. 154-I):

Establishment of rules for payments processing in the Republic of Uzbekistan;
Establishing the procedure for opening, maintaining and closing customer accounts by banks;
Issuance and withdrawal of banknotes from circulation;
The release into circulation of ingots of precious metals;
Establishing the procedure for buying and selling banknotes and precious metals;
Establishing the procedure for banks to perform operations with precious metals;
Providing short-term loans to banks;
Supervising banking activities;
Responsibility for licensing of banks;
Issuing permits and other documents.

1.2 Association of banks

According to the article 10 of the Law of the Republic of Uzbekistan dated 25.04.96 No. 216-I, banks can create associations and other consolidations to protect common interests and implement joint programs. They must notify the Central Bank within 10 days after the Association is registered or the decision to liquidate it is made.

2. Banking supervision

The Central Bank may:

Receive and verify bank statements, as well as other information received from them or subject to its supervision;
Check the activity of banks;
Use the database and information system of banks.

In certain cases, the Central Bank may require banks or banking groups to take immediate action.

If the Supervisory Board of bank does not comply with the requirements of the Central Bank, the latter has the right to call an extraordinary General meeting of shareholders and determine the agenda.

If the Supervisory measures to replace 1 or more members of the Supervisory Board or the management Board of a bank by the Central Bank are considered insufficient, the latter may:

Temporarily work with the Supervisory Board;
Temporarily replace members of the Supervisory Board;
To appoint one or more interim managers of bank.

The interim manager is appointed for a period of up to 12 months. It submits a report to the Central Bank on the bank’s financial position and measures taken within its authority (Chapter 6 of the Law of the Republic of Uzbekistan of 25.04.96 No. 216-I).

2.1 Risk management

Each bank annually or after changes in its organizational structure, operations or financial position develops/updates a plan for restoring its financial position (hereinafter – the “Plan“).

The Plan shall reflect the impact of the macroeconomic and financial crisis on the bank’s operations, as well as measures to address the problems arising from such an impact. The Plan shall contain measures that can reduce the negative impact on the bank’s operations.

Within 3 months, the Central Bank reviews the Plan developed by the bank and assesses the possibility of implementation, as well as the possibility of maintaining the bank’s financial position during such implementation.

Moreover, with regard to the main bank of the banking group, such a bank shall develop a separate plan for the recovery of the banking group.

Banks do not have the right to pay dividends to shareholders and other persons if:

They violate and do not comply with prudential regulations;
As a result of such payments, they will go bankrupt or show signs of bankruptcy;
They do not meet the requirements of the Central Bank;
The Central Bank requested that profits shall not be distributed.

Banks also need the consent of the Central Bank to distribute profits in case of:

Exceeding the total amount of dividend payments of 10% of the Bank’s equity;
The presence of a loss for the current or previous quarter for the financial year.

Banks are also required to comply with mandatory reserve requirements set by the Central Bank.

Banks are prohibited from entering into transactions with related persons of the bank when such transactions are concluded on conditions more favorable than those provided for persons not related to the bank (the Law of the Republic of Uzbekistan of 25.04.96 No. 216-I).

2.2 Prudential requirements

Prudential standards are set by the Central Bank and include:

Capital adequacy ratios;
maximum risk per borrower or group of related borrowers;
maximum size of major credit risks and investments;
concentration coefficients by sector;
liquidity ratio;
maximum amount of risk for the bank’s related persons;
the maximum size of the loans without security (blank loans);
requirements for classification and assessment of the quality of bank’s assets, formation of reserves against possible losses on bank’s assets created on the basis of their classification;
requirements for calculating interest on bank’s assets and crediting them to bank’s income account;
the maximum amount of acquired shares and shares in the authorized capital of legal entities;
requirements for the acquisition and ownership of real estate and other property;
open currency position limits and other regulations (the Law of the Republic of Uzbekistan of 25.04.96 No. 216-I).

2.3 Prudential supervision

Prudential supervision is carried out by the Central Bank in order to prevent specific banking risks. Namely, the Central Bank monitors whether banks comply with legal requirements, monitors the systems and strategies used by banks to comply with prudential requirements. Banks are required to provide information on internal management mechanisms, accounting records, and administrative procedures to verify compliance with prudential requirements.

The Central Bank reviews and evaluates the systems and strategies of banks without the approval or notification of state authorities.

The prudential supervision program includes:

Central Bank supervision and resource allocation;
Procedures for identifying banks that need additional supervision;
Plan of the inspection of banks.

The Central Bank may, at its discretion, increase the frequency of inspections and conduct thematic inspections of certain risks (the Law of the Republic of Uzbekistan of 25.04.96 No. 216-I).

2.4 Consolidated supervision

If a banking group is established and the Central Bank defines a bank as the main bank or a member of a banking group, the Central Bank must exercise consolidated control. It is noteworthy that a bank can be a member of only one banking group (the Law of the Republic of Uzbekistan of 25.04.96 No. 216-I).

3. Licensing of activities

3.1 Registration and licensing of banks

The bank licensing process consists of two stages:

obtaining prior permission from the Central Bank:

Founders must submit an application to the Central Bank for a preliminary permit to open a bank no later than one month after signing the Foundation agreement. Within a month, the Central Bank reviews the documents submitted by the founders. The decision to issue a preliminary permit is made no later than three months from the date of submission of the application. After obtaining permission, the founders perform organizational and technical measures in order to obtain a license and register the bank. In contrast to the previous practice, the current banking license also includes permission on investment activities of banks.

Bank registration:

Banks receive the status of a legal entity from the moment of their registration by the Central Bank. A license is also issued at the same time. Banking operations performed on behalf of the bank before its registration are invalid (Regulation of the Board of the Central Bank of the Republic of Uzbekistan dated 30.06.2020 No. 3252).

3.2 Accreditation of representative offices

If a bank of a foreign country intends to open a representative office in Uzbekistan, it must first be accredited; in particular, it shall obtain permission from the Central Bank to conduct banking activities on the territory of Uzbekistan. A prerequisite for foreign banks opening a representative office in Uzbekistan is to operate in their country for at least 5 years. Also, the bank must have a positive reputation and a reliable financial position. Moreover, banks registered in offshore zones cannot open a representative office in Uzbekistan. Within 1 month, the Central Bank makes a decision on the bank’s accreditation. Further, within 5 days from the date of making such a decision, the bank is issued an accreditation certificate. Accreditation is carried out for a period of 3 years, but no more (Regulation approved by the CBB, registered by the Ministry of justice on 23.12.08 No. 1883).

4. Interbank transactions

4.1 Clearing settlement system of the Central Bank

The interbank settlement system requires effective regulation and organization of this activity. It is for this purpose that the Central Bank has created a clearing settlement system, officially known as the “Interbank universal netting information system“.

4.2 Internal exchange (overnight)

The Central Bank conducts deposit operations with commercial banks, namely, attracts funds from commercial banks for deposits. Deposit operations are performed in the national currency of the Republic of Uzbekistan (Soums). Such operations are carried out on the basis of a General agreement between the Central and commercial banks.

To perform Deposit operations, commercial banks must meet the following requirements:

Timely and complete fulfillment of mandatory reserve requirements of the Central Bank. Namely, at least once a month, banks should analyze the reserve to cover possible losses on the bank’s assets (Appendix to the CBB registered by the Ministry of justice on 14.07.15 No. 2696);
No overdue debt obligations to the Central Bank.

Applications for performing deposit operations are submitted via the electronic trading platform.

There are 2 types of deposit operations:

Deposit auctions:

Information about the Deposit auction is published on the official website of the Central Bank within 3 days. Commercial banks send applications via the electronic trading platform.

Deposit operations at fixed interest rates:

“overnight” – a Deposit operation, which is within one working day;

“1 week” – a Deposit operation, which is within seven calendar days;

“2 weeks” – Deposit operation, the term of which is fourteen calendar days;

“1 month” – Deposit operation, which is within one month;

“3 months” – a Deposit operation, the term of which is three months (Regulation on the procedure for performing Deposit operations Of the Central Bank of the Republic of Uzbekistan with commercial banks to the Resolution of CBB, registered by the Ministry of justice on 25.10.18 №3079).

4.3 Opening correspondent accounts

Banks can open correspondent accounts in national and foreign currency in the Central Bank of the Republic of Uzbekistan, as well as correspondent accounts in resident banks.

Banks, after registering with the Central Bank of the Republic of Uzbekistan and issuing a banking license, open a correspondent account in national and foreign currencies in the settlement center of the Central Bank of the Republic of Uzbekistan.

Non-resident banks can also open correspondent accounts with the Central Bank of the Republic of Uzbekistan and commercial banks.

4.4 Bonds of the Central Bank

Central Bank can issue and place bonds among commercial banks. Such placement is carried out through auctions.

Information on the terms of placement of bonds at auction is posted on the Central Bank’s website no later than 3 business days prior to the auction.

The Central Bank assigns a registration number to each dealer in order to keep records of bonds and register transactions.

Information about the auction results is published on the official website of the Central Bank and on the website of the currency exchange (Appendix to the Resolution of the CBB registered by the Ministry of justice on 25.10.18 No. 3080).

5. Permit procedures

5.1 Opening an account abroad by a bank

According to Appendix No. 3 to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated 10.03.14 No. 56, in general, when opening an account abroad by a resident legal entity, permission from the Central Bank is required. However, according to the same document, authorized banks have the right to have correspondent and other accounts in banks abroad. Authorized banks were commercial banks that were licensed to conduct currency transactions. However, by Presidential Decree, the practice of issuing licenses to commercial banks to conduct currency operations was canceled. Namely, operations of commercial banks with foreign currency are carried out on the basis of a license for the right to conduct banking activities (Decree of the President of the Republic of Uzbekistan dated 02.09.17 No. 5177). Thus, commercial banks have the right to open accounts abroad on the basis of their banking license, without obtaining permission from the Central Bank.

5.2 Preliminary approval of the Antimonopoly authority

Preliminary approval from the Antimonopoly authority is required in the following cases:

transactions involving the acquisition by legal entities or individuals of more than 50% of the bank’s authorized capital;
the total book value of assets or total revenue from the sale of goods for the last calendar year of the parties involved in the transaction exceeds one hundred thousand times the basic estimated value, or one of the participants in the transaction is an economic entity that occupies a dominant position in the commodity or financial market. You can read more about Antimonopoly control here.

5.3 Preliminary approval of the Central Bank of the Republic of Uzbekistan

Prior permission from the Central Bank of the Republic of Uzbekistan is required in the following cases:

Acquisition of more than 20% of the bank’s shares;
Acquisition of shares of resident banks of the Republic of Uzbekistan;
Bank reorganization;
Voluntary liquidation of a bank;
Purchase of own shares by banks;
Registration of a bank branch;
Opening of subsidiary banks, branches, representative offices, participation in the creation of banks abroad (Appendix No. 1 to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated 10.03.14 No. 56).

The documents required for obtaining permits are submitted by the applicant (bank) to the Central Bank by post or electronically. If the documents are submitted electronically, they must be confirmed by an electronic digital signature.

The Central Bank, in turn, considers documents and applications for the issuance of documents of a permissive nature within a period not exceeding 30 days from the date of receipt of documents. There is no fee charged for processing applications for permits issued by the Central Bank.

5.4 Issuance of the Central Bank’s conclusion

Each Bank must obtain the Central Bank’s opinion on the compliance of the premises, equipment, cash register and hardware with the requirements of the Central Bank. To get an opinion, the applicant (commercial bank or bank branch) submits to the main territorial Department of the Central Bank (hereinafter – the “Department”) certain document. After receiving the application and documents, the head of the Department forms a Working Commission, which, in turn, examines the compliance of the bank building with the requirements and conditions of the Central Bank. On the basis of the Act of the Working Commission, the Department issues an appropriate conclusion within 30 days from the date of receipt of documents (Appendix No. 5 to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated 10.03.14 No. 56).

5.5 Obtaining permission to import and export of foreign and (or) national currency in cash

A permit for the import and export of foreign and (or) national currency is issued for each individual case when a commercial bank intends to import or export foreign and (or) national currency in cash. The Bank submits an application to the Central Bank. The Central Bank considers the application and issues a permit no later than 10 working days from the date of receipt of the application (Appendix No. 4 to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated 10.03.14 No. 56).

6. Investment activity of banks on securities market

Banks have the right to carry out professional activities in the securities market (hereinafter – “Activities“) as investment intermediaries, investment asset managers and investment consultants. Commercial banks can carry out such Activities after obtaining a license to perform banking activities; a separate license is not required.

6.1 Requirements for banks implementing Activities

Bank must implement Activities in accordance with the legislation.
As an investment intermediary, the bank is obliged to keep records of securities and funds of each client in the Central securities Depository.
Bank must have a separate structural division that deals with investment issues. Employees of such a division must have a certificate for the right to perform operations with securities. Also, the head of such a division must have a certificate of category 1. The procedure for such certification is established by the Agency for capital market development.
When registering off-exchange transactions in securities, banks are required to comply with requirements as to keeping of register of such transactions and to provide information on the registered transactions to the Agency for capital market development (Regulation to the Resolution, registered by the MJ on 02.04.08 No. 1782).

6.2 Disclosure of information by banks implementing Activities

At the request of the investor, the bank implementing Activities provides:

A copy of the state registration document;
A copy of the license on implementation of banking activities;
Information about its authorized capital;
Information on the state registration of the issue (prospectus) of securities purchased by the investor;
Reporting on the results of transactions with securities (article 45 of the Law of the Republic of Uzbekistan of 22.07.08 No. ZRU-163).

The bank shall also inform the Agency for capital market development in writing within 2 business days of the following transactions:

One-time transactions with securities of one Issuer under a certain condition;
During one quarter of operations exclusively with securities of one Issuer.

Moreover, the bank shall provide the Agency for capital market development with the following information within 30 days after the end of each quarter:

A copy of the balance sheet;
Report on own funds and average annual value of investment assets (Rules to the Order registered by the Ministry of justice on 31.07.12 No. 2383).

Along with disclosure requirements, banks must also comply with bank secrecy laws.

Banking System in Uzbekistan

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