Uzbekistan adopted strategy for reforming the banking system in 2020-2025

In accordance with the Decree of the President of the Republic of Uzbekistan dated May 12, 2020 No. PP-5992 “On the Strategy for reforming the banking system of the Republic of Uzbekistan in 2020 – 2025”  the main directions for reforming the banking sector in Uzbekistan are defined as follows:

  • increasing the efficiency of the banking system by creating competitive conditions, lending on a market basis, reducing dependence on government resources, modernizing banking services;
  • ensuring financial stability of the banking system by improving the quality of the loan portfolio and risk management, improving corporate governance;
  • reduction of the government participation in the banking sector through the comprehensive transformation of state-owned commercial banks, the introduction of modern banking standards, information technologies and software products, sale of the government shares on a competitive basis to investors with relevant experience and knowledge;
  • increasing the accessibility and quality of financial services, the widespread introduction of remote services to the public and small businesses.

The Decree also approved the “Strategy for reforming the banking system of the Republic of Uzbekistan in 2020 – 2025” (‘Strategy’) and the “Road Map for reforming the banking system of the Republic of Uzbekistan”.

According to the approved Strategy the privatization of major state-owned banks will be implemented in a two-stage process.

The first stage is the institutional and corporate transformation of state-owned banks in 2020-2021.

The process of institutional and corporate transformation of state-owned banks will be applied in four priority areas:

  1. Improving corporate governance;

  2. Improving the quality and expanding the range of banking services;

  3. Implementation of modern information technologies;

  4. building human resources.

The second stage is the privatization of the government shares after the successful transformation of banks to strategic investors with the appropriate experience, knowledge and reputation.

The Strategy provides that the transformation and privatization of the state-owned banks will be performed together with international financial institutions and international consulting companies:

1) JSCMB “Ipoteka-bank” and JSCB “Uzpromstroybank” with the assistance of the International Finance Corporation

2) JSCB “Alokabank” with the assistance of the European Bank for Reconstruction and Development and the Asian Development Bank;

3) JSCB “Asaka” with the assistance of the European Bank for Reconstruction and Development;

4) JSCB “Qishloq Qurilish Bank” and JSCB “Turon Bank” including consideration of their merger with the involvement of international financial institutions and consulting companies.

As part of the implementation of the Strategy, government shares of JSC “Halk Bank” and JSC “Asia Alliance Bank” will be sold to strategic foreign investors.

During the reformation of the banking system, government participation will remain in three banks – JSC “National bank for foreign economic activity of the Republic of Uzbekistan” (NBU), JSC “Agrobank” and JSC “Microcreditbank”.

NBU is defined as a systemically important bank and it will mainly focus on providing bank services for strategic enterprises and investment projects on a market basis, as well as on providing a wide range of banking products.

The Decree also provides the creation of a Project Office for the transformation and privatization of state-owned commercial banks under the Ministry of Finance of the Republic of Uzbekistan.

Brief information about the banking system of Uzbekistan.

The banking system of the Republic of Uzbekistan is currently represented by 31 commercial banks.

The government has a dominant position in the banking sector – 13 out of 31 banks have government participation in capital. The capital of the state owned banks is more than 87% of total capital of the banking system of Uzbekistan, and assets of such banks are more than 85% of the total assets of the banking system.

The active phase of the reformation of banking sector launched in 2017 is aimed at liberalizing the foreign exchange market, removing obsolete restrictions on banking and releasing banks from their unusual functions and expanding the accesibility of banking services.

Modified laws of the Republic of Uzbekistan “On the Central bank of the Republic of Uzbekistan”, “On banks and banking activities”, “On currency regulation” and “On payments and payment systems” were adopted in 2019.

 

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