Uzbekistan’s Banking Regulations and Compliance: What You Need to Know
In recent years, Uzbekistan has undergone significant reforms aimed at liberalizing its economy and improving its business environment. One of the key areas that have seen significant changes is banking and payments.
The Road to Reform
In 2018, President Shavkat Mirziyoyev approved a program for the development of electronic commerce in the country, which included measures to accelerate the growth of e-commerce by eliminating problems and shortcomings that hindered its development. The decree on “Measures to Accelerate the Development of Electronic Commerce” equated electronic checks, receipts, and other documents with paper documents confirming payments.
Key Developments
- E-commerce entities can now accept payments through corporate bank cards using payment terminals and electronic payment systems.
- Mandatory 15% prepayment for goods sold through e-commerce channels was canceled.
- Special licenses are no longer required for urban, suburban, intercity, and international transportation of passengers and goods by road.
Other Notable Developments
- Union Pay cards were introduced, allowing customers to receive money transfers via SMS.
- Online deposits options were launched by several banks.
The New Law on Payments and Payment Systems
In 2019, the government approved a new law on “Payments and Payment Systems”, which entered into force on February 1, 2020. The law defines payment systems, their types, participants, and rules of functioning in greater detail than its predecessor.
Key Provisions
- Introduced a new classification of payment systems, including significant and other systems.
- Significant systems are those that meet criteria established by the Central Bank and whose stable functioning is crucial to the smooth operation of the payment service market.
Regulatory Environment
Most regulatory instruments are now in the hands of the Central Bank, which controls payment system operators and payment service providers for compliance with the information security regime. Annual reports must be submitted to the Central Bank before April 1, and violators must inform the regulator promptly about any violations and measures taken to minimize consequences.
Banking Sector Growth
The banking sector in Uzbekistan has seen significant growth, with its total capital increasing by more than three times since the end of 2016. State-own banks have played a major role in this growth, with four major banks holding almost 70% of assets.
Prospects for Foreign Banks
Despite some foreign banks entering the market and expected privatization of state banks in the short term, experts believe that the entrance of foreign banks will not significantly change the situation due to the limited impact expected.
Competition among Banks
Uzbekistan is leading the CIS countries when it comes to the share of the public sector in the banking system, which reduces competition among banks. However, this does not necessarily mean that there are no opportunities for private and foreign banks to operate successfully in the country.