December 2019 – Spotlight on Uzbekistan: Kinstellar's regular look at the Uzbek market


On November 1st the President Mirziyoyev signed the law "On Payments and Payments Systems" (the "Law"). The Law will enter into force on February 2, 2020, and will considerably expand the regulation of payment systems. It will also replace the Law "On Electronic Payments" of 2005.

The Law introduces the concept of systemic important systems, which will be subject to tighter control to ensure the safety of the financial sector. It also defines the licensing requirements and the responsibilities of payment operators, payment agents, and payment organisations, as well as the standards of risk management for all entities that provide payment services.

Besides, the Law aims to improve the legal regime governing e-payments by creating rules for the issuance and utilisation of e-money. E-money can be issued by the Central Bank and banks of Uzbekistan and shall be nominated in national currency. E-money can be issued and operated either by banks or other companies, that have a corresponding license. The Law also addresses prevention of money laundering by requiring the issuer to submit information on the agreements entered into with operators of e-payment systems and restricts the activities of unidentified e-money users. The amount that an unidentified user will be allowed to store on his account is capped at five "calculation bases" (one calculation base is ~23 USD), and each transaction cannot exceed one calculation base. In contrast there will be no cap on the amount that can be stored for identified users, and transactions for identified users cannot exceed 100 times the "calculation base".

Lastly, the Law expanded the legislation in regards to payment methods, namely banking cards. In addition to traditional debit and credit cards, the banks will be allowed to issue virtual bank cards, which should have a positive effect on e-commerce.

Law "On Payments and Payment Systems" ZRU-578 of 01.11.2019.



The President of Uzbekistan signed a Decree "On improving monetary policy with a phased transition to the inflation targeting regime" (the "Decree").

The Decree addresses the issues of inflation, prescribing different governmental bodies dealing with monetary policy to adopt a number of measures to tackle inflation and provide more autonomy to the banks.

Starting from 2020 the Central Bank shall implement inflation targeting mechanisms, to reduce inflation to 10% in 2021 and will set a permanent inflation target at 5% in 2023.  By January 1, the Central Bank shall introduce financial instruments that influence market interest rates. Such instruments include Central Bank bonds, overnight deposits, regular deposit auctions, credit auctions and overnight loans secured by government and foreign currency. Legislation regulating derivative instruments for managing interest and currency risks (such as swaps, options, futures) is expected to be updated during 2020. Furthermore, the Government intends to increase the role of commercial banks and reduce state influence on the financial sector of the economy. For these purposes, starting from January 1, 2020, interest rates for all types of loans issued by commercial banks (in national currency), including those allocated under government programs, are set at a level not lower than the Central Bank's refinancing rate, with the exception of state mortgage lending programs, as well as loans to agricultural producers for growing raw cotton and cereal crops; No loans at preferential interest rates will be issued starting from January 1, 2021. Commercial banks will be given the right to determine interest rates independently, but the Government will introduce compensatory mechanisms for exceptional cases.

The Decree also instructs the Capital Markets Development Agency together with the Ministry of Finance and Central Bank to submit proposals to the Cabinet of Ministers on the conditions, mechanisms and terms for providing international financial institutions, which are non-residents with access to the Uzbek financial market.

Presidential Decree "On improving monetary policy with a phased transition to the inflation targeting regime" UP-5877 of 18.11.2019.



A new edition of the Law "On Banks and Banking activities" (the "Law") entered into force on November 5, 2019.

The new edition extends the list of approved operations for banks by adding new services such as trust management of property and assets, purchase and sale of refined precious metals, and operations with derivative financial instruments.

New legislation proscribes banks to engage in trade, production and insurance activities directly. At the same time, banks are allowed to outsource certain types of services and operations after obtaining permission from the Central Bank.

The further changes were introduced in respect of the corporate governance structure. Members of the supervisory and executive board, alongside key managerial personnel are now required to satisfy specific requirements such as business reputation, skills and knowledge. The consent of Central Bank in respect of each nominee has to be obtained before the nominee takes office.

The Law also addresses the issues of financial stability. It requires the bank to follow the requirements of capital adequacy, leverage ratios, risks levels, liquidity and authorised capital as set by the Central Bank. The authorised capital requirement remains at 100 billion soum.

A special regime was created for foreign entities willing to operate on the territory of Uzbekistan. In case of international financial institutions, the Central Bank will now require confirmation from a home regulator of the institution in question, that it is under supervision and is allowed to accept deposits in its home jurisdiction. Other entities will not be able to obtain more than fifty per cent of shares in a local bank.

Amongst others, the Law introduced the concepts of banking groups and established a special regulatory regime over such groups.

Law "On Banks and Banking activities" ZRU-580 of 05.11.2019.



A new edition of the Law "On the Central Bank" (the "Law") was adopted on November 11, 2019.

The Law updated the legal status, main goals, functions and powers of the Central Bank. One of the crucial updates was the replacement of former generic functions with a detailed list of authorised activities. The Law also increased the authorised capital of the Central Bank from 2 billion to 1 trillion soum.

Under the previous legislation, the Central Bank acted as a banker, advisor and a fiscal agent of the Government. Now, in addition to these activities, the Central Bank is responsible for the development and implementation of monetary policy; carrying out currency regulation and currency control; acting as a licensing authority for financial organisations such as banks, payment organisations and operators, currency exchanges, credit bureaus and others.

The main objectives of the Central Bank are to ensure price stability, the soundness of the banking and payment systems, whereas earlier, the Central Bank was responsible only to ensure the stability of the national currency. Special emphasis was made within the Law, that the actions of the Central Bank should not adversely affect the stability of prices.

The Law also expands the list of prohibited activities. Now, the Central Bank is proscribed from carrying out commercial activities and providing any financial assistance either to Government or other entities. It can no longer issue guarantees for the obligations of the Government or third parties and hold shares of banks and other entities except subordinate organisations.

The structure of governance was also affected by the new Law. The number of members in the executive board was reduced from 11 to 9. However, the appointment of the Chairman and the accountability of the Central Bank before the Senate remains unchanged.

Amongst others, the Law also addresses the issues of conflict of interests by confirming the autonomy of the Bank from the Government, and introduces requirements for corruption prevention.

Law "On the Central Bank" ZRU-582 of 11.11.2019.



A Council of Foreign Investors under the President of the Republic of Uzbekistan was created on November 13, 2019.

The Council acts as an advisory body to the President, who at the same time is the Chairman of the Council. The Council advises on the matters of investment, industrial, technological, and innovative development of the country. The mission of the Council is to create a favourable investment climate and effective mechanisms to stimulate domestic and foreign investments into priority sectors of the economy, such as organisation of competitive export-oriented production lines, and the development of trade relations.

Members of the Council are approved by the President, and include Uzbek and International governmental officials, businessmen and renowned public figures.  In order to be qualified for the consideration a candidate has to satisfy the requirements set in the Order.

The Council consists of the Plenary Session, which is the main governing body of the Council; the Interim Session - a subsidiary governing body of the Council; the Executive Committee - the executive body of the Council; Working Groups - the basic bodies that develop recommendations and provide expert support to the Council; and the Secretariat, which is the working body of the Council.

The Plenary Session is held annually, and an interim session is held at least two times per year.

Presidential Decree "On Measures for the creation and organization of activity of the Council of Foreign Investors under the President of the Republic of Uzbekistan" PP4519 of 13.11.2019.

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