Explanatory Note on the New Edition of the Regulation on Corporate Governance in Commercial Banks

Explanatory Note on the New Edition of the Regulation on Corporate Governance in Commercial Banks

Effective corporate governance plays a crucial role in ensuring the proper functioning of the banking sector. The stability of banks is the foundation of financial stability; therefore, the quality of organizing banking activity is an important factor in achieving economic prosperity.

To improve governance in banks, the Central Bank has adopted the new edition of the "Regulation on Corporate Governance in Commercial Banks" (dated June 30, 2020, registration number 3254), which was developed based on the Basel Committee's "Principles for Corporate Governance in Banks" and internationally recognized norms.

This Regulation was developed in accordance with the Law of the Republic of Uzbekistan "On the Central Bank of the Republic of Uzbekistan" and the Law "On Banks and Banking Activity," as well as in compliance with the Decree of the President of the Republic of Uzbekistan No. PF-5992 dated May 12, 2020, "On the Strategy for Reforming the Banking System of the Republic of Uzbekistan for 2020-2025."

Its purpose is to improve governance in banks by implementing advanced corporate governance standards, ensuring the transparency and accountability of bank management bodies and their activities, and increasing the effectiveness of decision-making in management.

It also establishes norms regarding the powers and duties of bank management bodies, measures to prevent conflicts of interest in banks, ensuring transparency and openness of information, employee code of conduct in the bank, and the introduction of a system for reporting misconduct.

Unlike the previous version, the new Regulation provides a detailed description of the duties of the audit, risk management, and remuneration committees formed by the supervisory board, as well as the role of these committees in bank management. This, in turn, serves to define transparent areas of responsibility among the management bodies of commercial banks.

Additionally, the Regulation covers remuneration, measures to prevent conflicts of interest, and systems for reporting misconduct. These are aimed at increasing the accountability of members of the bank's executive body and employees, and encouraging them to conduct their activities with dedication.

The "Regulation on Corporate Governance in Commercial Banks" enters into force on October 1, 2020.