Financial Crime World

Uzbekistan’s New Banking Law Marks Major Step Towards Financial Sector Reform

In a significant move towards strengthening banking regulations, Uzbekistan’s Senate has approved a package of financial sector laws, including a new banking law. This landmark legislation marks the culmination of a year-long collaboration between the World Bank Group and the Central Bank of Uzbekistan (CBU).

A New Era in Banking Regulation

The new banking law represents a major shift in the country’s approach to banking regulation, moving away from prioritizing government-dictated policy priorities towards ensuring financial stability and protecting depositors. The reforms aim to establish a robust “gatekeeper function” that ensures private investors meet common fit and proper standards, and grant the CBU sufficient powers to regulate and supervise the banking sector effectively.

Collaboration with World Bank Group

The CBU invited the World Bank Group’s team to review an initial draft of the law, which identified several weaknesses. The team then worked closely with the CBU to draft a new law that would support the orderly transformation and sound development of the financial sector.

Key Challenges

  • Establishing a robust gatekeeper function to prevent non-transparent ownership structures and related party lending
  • Providing the CBU with sufficient powers to exercise supervisory judgment in the face of evolving banking risks
  • Shielding the CBU’s banking supervision from political and industry pressures, while granting supervisors better legal protection

World Bank Group Support

The World Bank Group’s support for the project helped to address concerns and set the stage for the passage of the new law. The final version upholds the fundamental concepts and principles established by the World Bank team.

Expected Impact

  • The new banking law is expected to have a galvanizing effect on financial sector reform in Uzbekistan
  • The World Bank Group is committed to building on the interest taken by policymakers in financial sector reforms

This landmark legislation marks an important step forward for Uzbekistan’s financial sector, and sets a positive example for other countries in the region.