Decision of the Management of the Central Bank of the Republic of Uzbekistan, registered on 27.04.2018, registration number 2696-2

Effective date

31.05.2018

All

01.01.2027

31.05.2018

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[OKOZ:

1.07.00.00.00 Legislation on finance and credit. Banking activity / 07.19.00.00 Banking system / 07.19.02.00 Commercial banks. Private banks. Foreign banks;

2.07.00.00.00 Legislation on finance and credit. Banking activity / 07.19.00.00 Banking system / 07.19.03.00 Bank reserves and provisions. Capitalization;

3.21.00.00.00 Complex‑type documents for amendments and additions / 21.04.00.00 Framework normative‑legal documents]

[TSZ:

1. Finance / Banks and other credit institutions. Loans]

Decision of the Management of the Central Bank of the Republic of Uzbekistan on Amendments and Additions to the Regulation on Classification of Asset Quality in Commercial Banks and the Procedure for Forming and Using Provisions for Covering Potential Losses on Assets

Registered by the Ministry of Justice of the Republic of Uzbekistan on 27 April 2018, registration number 2696-2

This decision amends the decision of the Management of the Central Bank of the Republic of Uzbekistan dated 14 August 2026, No. 22/3, "On approval of the Regulation on Classification of Asset Quality in Banks and the Procedure for Forming and Using Provisions for Covering Potential Losses on Assets" (registration number 3937, 10.09.2026) which will cease to be in force as of 1 January 2027.

In accordance with the laws of the Republic of Uzbekistan "On the Central Bank of the Republic of Uzbekistan", "On Banks and Banking Activity" and "On Accounting", the Management of the Central Bank of the Republic of Uzbekistan decides:

1. To amend and add to the Regulation on Classification of Asset Quality in Commercial Banks and the Procedure for Forming and Using Provisions for Covering Potential Losses on Assets, as attached to the decision of the Management of the Central Bank of the Republic of Uzbekistan dated 13 June 2015, No. 14/5 (registration number 2696, 14 July 2015) (Collection of Laws of the Republic of Uzbekistan, 2015, No. 28, article 374) and to the annex thereto.

2. This decision shall enter into force one month after the day of its official announcement.

Chairman of the Central Bank M. NURMURATOV

Tashkent,

31 March 2018,

12/20‑No

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Annex

Amendments and Additions to the Regulation on Classification of Asset Quality in Commercial Banks and the Procedure for Forming and Using Provisions for Covering Potential Losses on Assets

1. In paragraph 1:

   • The second sub‑paragraph shall be amended to read:

     "assets" — credit, micro‑loan, overdraft, leasing, factoring, securities, investments, funds in other banks, accrued non‑interest income, other private property of the bank, assets sold in installments, off‑balance‑sheet items (non‑callable credit obligations, unused credit lines, letters of credit, guarantees) as well as all claims other than accrued interest;

   • The seventh sub‑paragraph shall be amended to read:

     "unsecured assets" — assets that have not been formalised in the prescribed manner;

   • A new sub‑paragraph shall be added:

     "reliable (trustworthy) assets" — assets that generate a regular cash flow in the bank’s ledger and are allocated without collateral to borrowers with good reputation and credit history.

2. Paragraph 11 shall be supplemented as follows:

   "11. Classification of asset quality and its reflection in the bank’s balance sheet does not alter the terms of the contract concluded between the bank and the borrower, including the bank’s right to fully recover the principal debt and accrued interest, as well as penalties and fines for non‑performance of the contract."

3. Paragraphs 9 and 10 shall be amended as follows:

   9. Assets whose quality does not raise doubts about timely repayment of the debt are classified as “standard”. In this case:

   • The legal entity or individual entrepreneur engaged in business activity is financially stable, has sufficient capital, a high profitability level, and sufficient cash flows to meet all obligations, including the specific loan, as well as a feasible strategic plan, market competitiveness, good product manufacturing and a marketing plan for its product;

   • The borrower (or co‑borrower) individual has a stable source of income sufficient to repay the credit and interest obtained from the bank, possesses a good credit history, i.e., has previously repaid all credits and other obligations on time.

   The collateral must meet the “well‑collateralised” credit criteria. In particular, the types of collateral must be notarised where required by law, and, where necessary, must be registered in the prescribed manner, including entry in the pledge register concerning the commercial bank’s pledged assets.

   The commercial bank is entitled to recover the collateral without restrictions if the credit is not repaid. All documents concerning the collateral must be formalised in accordance with the law. Except for reliable (trustworthy) assets, if there are no overdue principal or interest obligations, such assets are classified as “standard”.

   10. Assets classified as “standard” do not encounter problems in repayment.

   If, within the last 180 days, the principal or (and) interest of the assets has been delayed by up to 30 days in a single case, the assets are still classified as “standard”, except for reliable (trustworthy) assets.

   In this case, assets whose terms have been revised cannot be classified as “standard”.

4. The second sub‑paragraph of paragraph 11 shall be amended to read:

   "Provisions for standard assets shall be allocated from the net profit remaining after payment of taxes and other mandatory payments, and, based on the remaining amount of standard assets as of the reporting date, shall be distributed in accordance with the decision of the shareholders’ general meeting on profit distribution, effective from the day the Regulation comes into force."

5. Paragraph 12 shall be amended to read:

   "12. If the borrower’s financial condition is considered stable but there are certain negative factors or trends that, if not remedied, could raise doubts about the implementation of the financed project or the borrower’s ability to repay the asset on time, the asset is classified as “sub‑standard”.

   The asset quality is classified as “sub‑standard” if at least one of the following factors is present:

   • Doubts concerning the borrower’s financial condition or control over the collateral;
   • Insufficient information or documentation on the credit in the credit files;
   • The borrower’s category‑2 file contains payment documents whose maturity does not exceed 30 days (borrowers with seasonal activity are excluded);
   • Within the last 180 days, there are several cases where the principal or (and) interest of the assets has been delayed by up to 30 days;
   • Reliable (trustworthy) assets have overdue principal or interest exceeding 30 days;
   • For secured assets, the principal and interest overdue period exceeds 30 days but does not exceed 90 days.

6. Paragraph 14 shall be amended to read:

   "14. If at least one of the following factors is present, the asset quality is classified as “unsatisfactory”:

   • The main sources of repayment are insufficient, requiring the sale of the pledged collateral and other principal means of the borrower, taking into account possible extensions of the debt to be repaid;
   • The borrower’s current financial condition or cash‑flow is insufficient to meet obligations;
   • The borrower’s capital is insufficient;
   • The borrower’s category‑2 file contains payment documents delayed between 31 and 90 days (borrowers with seasonal activity are excluded);
   • The sector’s trends and prospects are not stable;
   • The value of the collateral does not exceed the principal debt, or at least equals the unpaid portion of the principal debt (reliable assets are excluded);
   • Reliable assets have overdue principal or interest between 31 and 90 days;
   • Secured assets have overdue principal or interest between 91 and 120 days.

7. In paragraph 17, the fourth sub‑paragraph shall be amended to read:

   "If the borrower’s category‑2 file contains payment documents delayed between 91 and 180 days (borrowers with seasonal activity are excluded);"

   The paragraph shall be supplemented with the following sub‑paragraphs:

   • "If reliable (trustworthy) assets have overdue principal or interest exceeding 91 days but not more than 180 days;"
   • "If secured assets have overdue principal or interest exceeding 121 days but not more than 180 days."

8. The fourth sub‑paragraph of paragraph 20 shall be amended to read:

   "If the borrower’s category‑2 file contains payment documents whose maturity has been delayed to 180 days."

9. Paragraphs 211‑213 shall be added as follows:

   211. If the repayment schedule for the principal and accrued interest of assets allocated for more than two years is set for the last six months or if the contract does not contain a repayment schedule, the classification of the asset quality shall be downgraded by one category.

   212. Assets (including representative accounts, inter‑bank deposits and credits) placed with banks within the Republic shall be classified as follows:

   • If the repayment period of the principal and (or) interest is delayed up to 10 days — “unsatisfactory”;
   • If the repayment period is delayed between 11 and 30 days — “doubtful”;
   • If the repayment period is delayed from 31 days onward, and the bank where the asset is placed has its licence withdrawn or other termination procedures have begun — “hopeless”.

   The financial indicators of the banks where the assets are placed and the norms established by the Central Bank shall be continuously monitored.

   213. Assets placed with banks outside the Republic shall be classified as follows:
   • If the bank where the asset is placed has an investment rating equal to that of Standard & Poor’s, Fitch Ratings or Moody’s Investors Service, or another rating recognised by the Central Bank — “standard”;
   • If the bank’s rating is lower than the aforementioned investment ratings, or the bank’s rating has been downgraded from an investment rating — “sub‑standard”;
   • If there are overdue principal or interest obligations on the assets — “hopeless”.

   The financial indicators and rating assessments of the banks where the assets are placed shall be continuously examined.

   If the bank where the asset is placed has ratings from two or more rating agencies, the lowest rating shall be taken into account in the calculations.

10. In paragraph 26, the sixth and seventh sub‑paragraphs shall be added as follows:

"Securities guaranteed by governments of countries with low risk levels and their central banks, as well as guarantees of those governments;\ Guarantees issued by the International Monetary Fund and the World Bank Group (International Development and Reconstruction Bank, International Finance Corporation, International Investment Guarantee Agency, International Development Association) as well as the Asian Development Bank, Asian Infrastructure Investment Bank, European Bank for Reconstruction and Development, European Investment Bank, European Investment Fund, Islamic Development Bank and guarantees of the Council of Europe’s development banks;"

The sixth sub‑paragraph shall be considered the eighth sub‑paragraph; in the eighth sub‑paragraph the word “guarantee” shall be replaced with the word “collateral”.

11. Paragraphs 301‑303 shall be added as follows:

12. If the final contract term has not been changed, the interim payment dates for the principal and (or) interest of assets whose quality is classified as “unsatisfactory” shall be reviewed once. After the dates are revised, if at least three consecutive payments are made fully and on time according to the repayment schedule, the asset quality may be classified as “sub‑standard”.

If the repayment schedule stipulates equal (proportional) monthly payments from the month payments begin until the final contract term, three consecutive payments are required; otherwise, more than three payments of equal amount must be made on time.

302. The quality of assets whose terms have been revised shall be classified as “doubtful” if at least one of the following factors is present:

• The circumstances contemplated in the second, third, fourth and sixth sub‑paragraphs of article 28 of this Regulation;
• The final contract term has been extended once.

303. After the terms are revised, assets whose principal and (or) interest payments are not made fully and on time shall be classified as “hopeless”.

304. Paragraph 31 shall be amended to read:

"31. If the new borrower fully repays all outstanding principal and interest amounts and the next three consecutive payments according to the repayment schedule are made fully and on time, the classification of the problematic asset quality may be reconsidered accordingly."

13. Paragraph 33 shall be amended to read:

"33. The quality of assets cannot be classified into a higher or better category than the one assigned before the terms are revised (except for the cases contemplated in the second and third sub‑paragraphs of article 301). Under no circumstances may an asset be immediately assigned the “standard” category after its terms are revised.

If an asset’s terms are revised two or more times, its quality classification must be one step lower than the category assigned before the revision."

14. Chapter 41 shall be added as follows:

41‑CHAPTER. CLASSIFICATION OF THE QUALITY OF BANK GUARANTEES

331. The amount of provisions for possible losses on guarantees granted by commercial banks shall be determined based on the principal’s financial condition, credit history and the economic sector in which the principal operates, taking into account the principal’s creditworthiness.

332. The quality of a bank guarantee shall be classified as “standard” when the following conditions are met:

• The principal is financially stable;
• The principal has a high profitability level;
• The principal fulfills all financial obligations on time, including having sufficient cash flows to meet the guarantee obligations;
• The principal has the ability to develop commercial activities and freely attract financial resources;
• The principal’s activity is not limited to a single guarantor or consumer;
• All documents concerning the guarantee are formalised in accordance with the law;
• Payments on the principal’s credit or other debts are made on time.

333. The quality of a bank guarantee shall be classified as “sub‑standard” if any of the following conditions is present:

• The principal’s overall financial condition is stable, but there are certain negative economic factors that, if not remedied, could lead to the principal’s failure to meet its obligations on time;
• There is a downward trend in the principal’s income or cash‑flow.

334. The quality of a bank guarantee shall be classified as “unsatisfactory” if any of the following conditions is present:

• Serious deterioration of the principal’s financial condition;
• The principal’s income or cash‑flow has decreased by at least 50 % compared with the previous quarter (borrowers with seasonal activity are excluded);
• In the last reporting month the principal lacks the ability to cover all due obligations, including the guarantee amount, from cash flows generated during that month.

335. The quality of a bank guarantee shall be classified as “doubtful” if any of the following conditions is present:

• A worsening of any of the situations listed in article 334;
• The principal has a negative credit history over the last five years, i.e., has failed to make timely payments.

336. The quality of a bank guarantee shall be classified as “hopeless” if any of the following conditions is present:

• Occurrence of events where the bank must fulfil the guarantee obligations;
• Failure to make timely payments on the principal’s credit or other debts;
• The bank’s balance sheet does not record income in the last quarter until the guarantee is called (borrowers with seasonal activity are excluded);
• Ongoing court proceedings concerning the bank’s financial activities;
• Signs of bankruptcy.

337. The procedure for forming and using provisions for possible losses on bank guarantees shall be carried out in accordance with the Regulation on the Procedure for Granting Bank Guarantees (registration number 2364, 15 May 2012).

338. Paragraph 34 shall be amended as follows:

"Investments are considered to generate income when any of the following conditions is met:

• The bank receives income in the form of dividends;
• A positive difference arises as a result of re‑valuation of an investment made by the bank;
• The quotation on the stock exchange increases;
• The financial statements of the enterprise in which the bank has invested, after an external audit, show a profit for the reporting period."

16. The second sub‑paragraph of paragraph 35 shall be amended to read:

"The quality of such investments shall be classified in the lowest category."

17. Paragraph 361 shall be added as follows:

"361. The provision for covering possible losses on bank assets shall be formed in the currency of the respective asset."

(National Legal Database, 30.04.2018, 10/18/2696-2/1120‑No)