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Legal status, goals, functions, values and mission

Update date:  22 Feb 2020, 00:12

Legal status, tasks, functions, powers, principles of organization and activity of the Central Bank of the Republic of Uzbekistan are determined by the Constitution of the Republic of Uzbekistan, the Law of the Republic of Uzbekistan "About the Central Bank of the Republic of Uzbekistan" and other legislative acts.

It is enacted by Article 124 of the Constitution that the banking system of the Republic of Uzbekistan is headed by the Central Bank of the Republic.

In accordance with Article 1 of the Law of the Republic of Uzbekistan "About the Central Bank of the Republic of Uzbekistan" the Central bank is a legal entity and is the exclusive property of the state.

Central Bank is economically independent institution exercising its costs from its own revenues.

These provisions reflect the norms of international practice, under which the Central Bank is established as a legal entity belonging to the state, but the financial activities is carried out by the Central Bank itself. The Central bank is a public body, which in the framework of its competence develops guidelines for the single state monetary policy, has the exclusive right to issue banknotes in circulation in the form of notes and coins as legal tender, is the body of currency regulation and control, acts as a banker, advisor and fiscal agent of the government of the Republic of Uzbekistan, performs the functions of supervision and regulation of banks and other lending institutions. The properties of the Central Bank are its cash and other tangible assets, the cost of which is reflected in the balance sheet of the Central Bank.

The main purpose and objectives of the Central Bank of the Republic of Uzbekistan

Under the Law of the Republic of Uzbekistan "About the Central Bank of the Republic of Uzbekistan," the main purpose of the Central Bank is to ensure the stability of the national currency.

The main objectives are:

  • formation, adoption and implementation of monetary policy and policy on currency regulation;
  • organization and provision of effective payment system in the Republic of Uzbekistan;
  • the licensing and regulation of banking activities, the activities of credit unions, micro-credit organizations and pawn shops, the supervision of banks, credit unions, micro-credit organizations and pawnshops, licensing of production of forms of securities;
  • storage and management of official foreign exchange reserves of the Republic of Uzbekistan, including the provisions of the Government under the agreement;
  • organize jointly with the Ministry of Finance the cash execution of the state budget.

To ensure the stability of the national currency the Central Bank of the Republic of Uzbekistan solves its basic tasks, the essence of which are as follow:

  • implementing concerted monetary and currency policy, the Central bank exercises supervision over the total money supply in circulation, the stability of the exchange rate of the national currency against foreign currencies, promotes to maintain public confidence in the banking system.
  • varying the amount of the money supply through its credit and exchange business, the Central bank affects the dynamics of prices of goods and services, the total volume of production, exports and imports, impacts on employment levels.

The Central bank is the body of currency regulation and currency control.

The Central Bank:

  • issues normative documents on foreign exchange regulation, mandatory for all persons on the territory of the Republic of Uzbekistan;
  • issues and revokes licenses for foreign currency transactions to banks, other businesses and individuals, supervises and regulates their activities;
  • sets limits on open currency position and other economic measurement data for banks;
  • establishes a procedure for determining the rate of the national currency against foreign currencies;
  • owns and monitors the international reserves of the Republic of Uzbekistan.

The task of organizing and providing settlement system determines the main role of the Central Bank to ensure efficient payment system in the country. Payments on the territory of the Republic of Uzbekistan are carried out in the form of cash and non-cash payments.

The Central Bank of the Republic of Uzbekistan enacts obligatory normative documents setting the rules of accounts. Uniform application of these rules provides the continuity and timeliness of accounts throughout the country.

To ensure an effective system of settlements the Central Bank carries out constantly work to introduce new tools calculations based on modern technology, develops the system of accounting and reporting in accordance with international standards for the provision of financial and economic information of consumers - shareholders, investors, depositors, auditors, creditors and foreign companies, organizations and banks.

One of the main objectives of the Central Bank of the Republic of Uzbekistan is the banking regulation and supervision of banks and other lending institutions. This is necessary to maintain the stability of the banking system and protection of the interests of shareholders, depositors and creditors.

Among the most important means to achieve this objective there is the licensing of banks and other lending institutions. The purpose of licensing is the access to the market the banking and credit services of financially sound organizations run by persons of impeccable reputation, able to ensure public confidence in the banking and financial system.

Central Bank contributes to the maintenance of international reserves at a level sufficient for the implementation of monetary and currency policy of the Republic of Uzbekistan, as well as settling with international transactions.

Article 4 of the Law "About the Central Bank of the Republic of Uzbekistan" defines the prohibited kinds of the activity of the Central Bank.

According to this Article, the Central Bank is not entitled to:

  • engage in the provision of financial assistance;
  • carry out commercial activities;
  • participate in the capital of banks and other legal entities, except the participation in the capital of Halq Bank of the Republic of Uzbekistan, joint-stock commercial bank "Microcreditbank", as well as businesses and organizations that support the activities of the Central Bank.

The Central bank is accountable to the Senate of Oliy Majlis of the Republic of Uzbekistan and claimed by the special nature of its activities. In accordance with international practice, the central banks, responsible for internal and external stability of the national currency, are accountable to their parliaments, but do not obey them in their activities.

The Senate of Oliy Majlis considers the annual report of the Central Bank, as well as the report of the independent auditor.

At the same time, the Central bank publishes reports in the press about the current situation in the monetary-credit sphere and the main directions of the monetary policy. This information is necessary for analyzing the economic situation both at macro and micro levels. It allows to orient its activities for the public authorities and all business objects. This practice helps to maintain and enhance public confidence in the banking system.

It is necessary to emphasize the independence of the Central Bank. According to Article 6 of the Law "About the Central Bank of the Republic of Uzbekistan" the Central bank is independent in making decisions within their authority.

The state is not liable for the obligations of the Central Bank and the Central Bank is not liable for the obligations of the state, if they do not assume such liability, or unless otherwise is provided by legislation.

World experience shows that the more independent central bank, the more effective the results of its monetary and currency policies. High responsibility of the Central Bank in ensuring the effective functioning of the internal monetary circulation, the stable operation of the banking system make it conditional on legal consolidation of its independence in the development and implementation of the strategy and tactics of monetary and currency policies.

Article 7 of the above mentioned Act provides that the Central Bank within the competence issues normative documents binding upon all persons on the territory of the Republic of Uzbekistan.

The powers of the Central Bank of the Republic of Uzbekistan

The Board of the Central Bank has the following powers:

  • defines the main directions of monetary policy, including the scale of operations of the Central Bank in open market, accounts and loan interest rates of the Central Bank and the rate of the required reserve for banks in the Central Bank;
  • approves regulations of the Central Bank;
  • solves the issue of the participation of the Central Bank in international organizations;
  • determines the principal value and the samples of bank notes and coins, as well as the clauses of its immobilization;
  • approves the amount and terms of the loans to the Government of the Republic of Uzbekistan;
  • approves economic standards for banks and the rules of financial transactions for credit unions, micro-credit organizations and pawn shops, as well as considers their implementation;
  • makes a decision on the issue and revokes licenses to engage in banking activities, carries out the licensing of credit unions, micro-credit organizations and pawn shops, as well as the production of forms of securities;
  • defines the organizational structure of the Central Bank;
  • establishes, reorganizes and liquidates institutions and enterprises of the Central Bank;
  • approves the budget expenditures and revenues of the Central Bank;
  • reviews the annual and financial reports of the Central Bank;
  • confirms heads of the departments, institutions and enterprises of the Central Bank;
  • hears reports and reports of the heads of the departments of the Central Bank, its institutions and organizations;
  • establishes the conditions for hiring, discharge, compensation of employees of the Central Bank in accordance with the law and the procedure of obtaining loans and purchase of shares;
  • considers and resolves other issues within the competence of the Central Bank.

Also, according to the Law "About the Central Bank of the Republic of Uzbekistan" the Central bank exercises the regulation and supervision of banks, credit unions, microfinance institutions and pawnshops in order to maintain the stability of the financial banking system and protecting the interests of depositors, borrowers and lenders, as well as monitoring and control over their compliance with the rules of the internal control and the provision of information related to the prevention of legalization of proceeds from crime and terrorist financing to the specially authorized state body.

The Central Bank registers banks and credit unions, as well as issues the license to carry out banking operations, licenses the activities of credit unions, micro-credit institutions, pawnshops and production of forms of securities.

The Central bank keeps the State book of registration of banks, registers of licenses issued to the credit unions, microfinance organizations, pawnshops and the production of forms of securities.

However, in the framework of the supervisory functions the Central bank sets:

  • mandatory rules for banks to conduct banking operations, accounting and banking statistical reporting, compilation of annual reports;
  • Mandatory rules on financial operations, accounting and reporting for credit unions and microcredit organizations;
  • mandatory rules for pawnshops activities and operations.

The Central bank has the right to:

  • get and review reports and other documents of banks, credit unions, microfinance institutions and pawnshops, request and get information on their activities, including transactions;
  • require clarification on the received information;
  • inspect the activities of banks, credit unions and microcredit organizations, their affiliates and their affiliated persons, as well as the activities of pawnshops, impose sanctions on violators;
  • establish requirements for internal audit of banks;
  • establish requirements for the implementation of the classification of asset quality of banks and the creation of adequate reserves to cover potential losses on assets;
  • determine the conditions and the procedure to charge-off bad assets;
  • send binding orders to banks, credit unions, microfinance organizations and pawnshops to eliminate violations of their activities;
  • request and receive information about the financial position and reputation of the bank's shareholders in the event of the acquisition of part of the authorized capital stock, exceeding the size specified in the legislation;
  • produce the qualifying requirements to managers, board members and the chief accountant of the bank and its branches, heads of executive organs of credit unions and microfinance institutions.

The Central bank has the right to require auditors to comply with normative documents of the Central Bank, including the procedures and methodology, as well as get from them directly the information related to the audit of the bank.

Central Bank together with the specially authorized state organ adopts rules of internal control, mandatory for banks, credit unions, microfinance institutions and pawnshops.

The Central bank sets mandatory economic measurement data for the banks, including;

  • capital adequacy ratio;
  • the maximum exposure to a single borrower or group of related borrowers;
  • the maximum size of large credit exposures and investments;
  • liquidity ratios;
  • requirements for the classification and valuation of assets and provisioning against doubtful and non-performing loans that are created on the basis of such classification, in which deductions are charged to operating expenses of the bank;
  • requirements for the interest on loans and entering them in the account of the bank's income;
  • limits on open currency position.

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