Financial Crime World

Uzbekistan Introduces Sweeping Banking Reforms Amid Drive for Foreign Investment

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In a move aimed at further attracting foreign investment to the country’s banking sector, Uzbek President Shavkat Mirziyoyev has signed into law a sweeping overhaul of the nation’s banking regulations.

Key Provisions of the New Legislation

Increased Minimum Charter Capital Requirements

The revised law introduces significant changes to the “Law on Banks and Banking Activities.” One of the key provisions is an increase in the minimum charter capital requirement for Uzbek banks. The requirement will be:

  • UZS 100 billion (approximately USD 8.78 million) until September 1, 2023
  • UZS 200 billion (approximately USD 17.56 million) by March 31, 2024
  • UZS 500 billion (approximately USD 43.9 million) from January 1, 2025 onwards

The Central Bank of Uzbekistan has been granted the discretion to set a different timeline for compliance with these requirements in cases where banks are privatized and state shares are transferred entirely to non-residents.

Relaxed Restrictions on Foreign Ownership of Bank Shares

Another significant move is the lifting of restrictions on foreign ownership of bank shares. However, direct shareholders of banks will still be prohibited from being residents or registered in territories that offer preferential tax treatment or do not require disclosure of ultimate beneficial owners’ identities.

The restriction applies to individuals and legal entities who are potential shareholders of a bank, unless they have procured shares through a foreign stock market. This move is seen as aimed at attracting more foreign investment to the country’s banking sector, with the hope of boosting economic growth and development.

Context: Drive for Foreign Investment

The changes come amid a drive by the Uzbek government to increase foreign investment in key sectors, including:

  • Banking
  • Energy
  • Infrastructure

Analysts predict that the reforms will have a significant impact on the country’s financial landscape, paving the way for increased competition and innovation in the sector.