Law on private banking and financial institutions enters into force in Uzbekistan

Business Materials 19 December 2012 20:47 (UTC +04:00)

Uzbekistan, Tashkent, Dec. 19 / Trend, D. Azizov /

The law on "Private banking and financial institutions and guarantees of their activity" has entered into effect in Uzbekistan.

The law was adopted by the Uzbek Legislative Chamber in November this year and was approved by the Senate in early December.

The law aims to create a legal framework for creating private banks and financial institutions based on private ownership, expanding competition for increasing the quality of customer service , and to creating conditions for drawing private capital in the banking and financial sector.

Up until now, the activities of Uzbek private banks were regulated by the law on "Banks and banking activity" and the presidential decree on "Measures on encouraging the establishment of private commercial banks", adopted in 1997.

According to the law, private financial organizations must make up 50% of the share of the use of authorized capital

Legal entities, whose authorized capital includes a share of the state, state agencies, political parties, trade unions, public foundations and religious organizations can not be the founders of the banking and financial institutions.

Officials of state agencies can not hold paid positions in private banking and financial institutions.

According to the law, the state guarantees equal rights to private financial institutions and creates equal opportunities for reaching logistical, financial, and labor, information as well as other resources.

The ownership of private banks and financial institutions, as well as their founders is inviolable and protected by the state. The property of private banks and financial institutions is not subject to nationalization, requisition, or confiscation, except in cases envisaged by law.

In accordance with existing laws, the law also guarantees non-interference by state agencies or other organization in private financial institution activities.

State agencies, other organizations and their officials are forbidden to interfere in the activities of private banks and financial institutions, including the appointment of senior officials of these institutions and their branches, the requirement of various kinds of payments and contributions by private banks and financial institutions. Law enforcement and regulatory bodies are forbidden to interfere in the activity of private banks and financial institutions for the business risk management, including those associated with the formation of the loan portfolio and the assets of private banks and financial institutions.

Inspections of private banking and financial institutions' activity, held by supervisory bodies, can be implemented in a planned manner, not more than once every five years in accordance with the law. Checks may not exceed 30 calendar days, and must not create barriers to private banking and financial institutions for their normal functioning.

The basis for inspections conducted by prosecutor's office, interior bodies and National Security Service is the existence of the criminal case. The activities of private banks and financial institutions, connected only with the criminal case may be checked.

Private banking and financial institutions have the right not to allow people without necessary documents to check, not to meet the requirements of law enforcement bodies and regulatory bodies on the issues beyond their competence and not to acquaint them with materials not relevant to the inspection.

All disagreements and uncertainties with using the legislative norms, arising during audits are interpreted in favor of the private banks and financial institutions.

Losses caused by the private banking and financial institutions as a result of unlawful decisions of the state and other bodies or actions (inaction) of their officials, must be reimbursed by the state and other bodies on the basis of a court decision. According to a court decision, recovering losses may be entrusted to state officials and other bodies.

The Uzbek banking system is currently represented by 30 banks, including three state, five - banks with foreign capital, 12 - joint stock and 10 - private.

In 2011, the total assets of Uzbek banks increased by 32.4 percent and amounted to 27.45 trillion soums, the total loan portfolio - by 35.6 percent to 15.65 trillion soums, the aggregate bank capital - by 30 percent to 5.334 trillion soums compared to 2010.

The official exchange rate is 1.980.25 soums/$1 on Dec. 19.