On Approval of the Regulation on Transactions with Persons Related to the Bank

Resolution of the Board of the Central Bank of the Republic of Uzbekistan, registered on August 5, 2015, registration number 2706

Date of entry into force

10.11.2015

All

30.01.2021

25.12.2019

06.09.2018

31.07.2017

10.11.2015

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Document lost force 30.01.2021

[
OKOS:
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07.00.00.00 Legislation on Finance and Credit. Bank Activity / 07.21.00.00 Bank Activity / 07.21.01.00 General Issues]
[
TSZ:
1.
Finance / Banks and other credit institutions. Credits]

Resolution of the Board of the Central Bank of the Republic of Uzbekistan

On Approval of the Regulation on Transactions with Persons Related to the Bank

[Registered by the Ministry of Justice of the Republic of Uzbekistan on August 5, 2015, registration number 2706]

This resolution loses its force on January 30, 2021, based on the Resolution of the Board of the Central Bank of the Republic of Uzbekistan No. 21/12 dated September 21, 2020 "On Approval of the Regulation on the Maximum Amount of Risk for a Single Borrower, a Group of Interrelated Borrowers, Including Persons Related to the Bank" (registration number 3283, 29.10.2020).

In accordance with the Laws of the Republic of Uzbekistan "On the Central Bank of the Republic of Uzbekistan" and "On Banks and Banking Activity" and the Resolution of the President of the Republic of Uzbekistan No. PQ-2344 dated May 6, 2015 "On Measures to Further Increase the Financial Stability of Commercial Banks and Develop Their Resource Base", the Board of the Central Bank of the Republic of Uzbekistan resolves:

1. Approve the Regulation on Transactions with Persons Related to the Bank in accordance with the Appendix.

2. This resolution enters into force three months after the date of its official publication.

Chairman of the Central Bank F. MULLAJONOV

Tashkent city,

July 22, 2015,

No. 19/15

APPENDIX

to the Resolution of the Board of the Central Bank of the Republic of Uzbekistan No. 19/15 dated July 22, 2015

REGULATION

on Transactions with Persons Related to the Bank

In accordance with the Laws of the Republic of Uzbekistan "On the Central Bank of the Republic of Uzbekistan" and "On Banks and Banking Activity" and the Resolution of the President of the Republic of Uzbekistan No. PQ-2344 dated May 6, 2015 "On Measures to Further Increase the Financial Stability of Commercial Banks and Develop Their Resource Base", this Regulation establishes requirements for concluding transactions with persons related to the bank, maintaining accounting for such transactions, and submitting reports on them.

Chapter 1. General Provisions

1. The main purpose of this Regulation is to establish restrictions by the Central Bank on the conclusion of transactions with persons related to the bank.

2. The following main concepts are used in this Regulation:

transactions with persons related to the bank — credit and credit lines, overdrafts, leasing, factoring, repos, swaps, all forms of modification of credit terms, securities and investments of any kind, any legally grounded obligations to purchase securities or foreign currency, sale of assets with installment payment conditions, opening letters of credit, providing guarantees, purchase of property, and other financing-related transactions; (Second paragraph of item 2, in the edition of the Resolution of the Board of the Central Bank of the Republic of Uzbekistan No. 14/16 dated June 24, 2017 (registration number 2706-1, 24.07.2017) — UR QHT, 2017, No. 30, Article 745)

close relatives of an individual — spouse, parents, children, full and half siblings, grandparents, grandchildren.

major shareholder of the bank — any person holding 10 percent or more of the bank's authorized capital.

3. The following are considered persons related to the bank:

a) officials of the bank, including members of the bank's council, all employees of this bank, and their close relatives;

b) an individual holding 10 percent or more of the bank's authorized capital and their close relatives;

c) officials of a legal entity holding 10 percent or more of the bank's authorized capital, as well as their close relatives;

d) if a legal entity is a participant (shareholder) of the bank and its share in the authorized capital exceeds 10 percent, such legal entity, its officials, and the close relatives of these persons;

e) associations of legal entities or individuals whose major shareholder (including legal and individual persons) is a major shareholder, exerts significant influence, or is a related person of the bank.

4. A person acting on the basis of the indication of a person related to the bank, or if a person related to the bank is interested in the transaction, is considered to be acting on behalf of a person related to the bank. Persons acting on behalf of persons related to the bank include:

legal representatives of persons related to the bank;

persons authorized to act on behalf of a person related to the bank based on an agreement concluded with persons related to the bank;

persons who provide benefits directly or indirectly to persons related to the bank from the concluded transaction;

legal entities over which a person related to the bank can exert significant influence;

legal entities whose major shareholder is also a major shareholder of the bank.

5. A person related to the bank is considered to be able to exert significant influence on a legal entity in the following cases:

if a person related to the bank is a major participant (shareholder) of a legal entity and holds 10 percent or more of the authorized capital of the legal entity;

if participants (shareholders) or management of a person related to the bank have the opportunity to manage or direct the activities of a legal entity based on an official agreement;

if a legal entity, a participant of which is a person related to the bank, is a full partnership.

6. If transactions concluded by banks with persons related to them or on their behalf are based on more favorable terms than transactions concluded with unrelated persons, the conclusion of such transactions is prohibited.

The transactions envisaged in the first paragraph of this paragraph, in particular, include:

transactions with high risk or due to other unfavorable circumstances that the bank would not conclude with unrelated persons;

charging lower interest or brokerage fees compared to those charged from unrelated persons;

paying a lower amount for services rendered to persons related to the bank than that paid by unrelated persons, or not paying for services at all;

extending payment deadlines for debts of persons related to the bank in situations where such right is not granted to unrelated persons;

creating advantages in the current monitoring of risk conditions for persons related to the bank compared to unrelated persons, covering or writing them off;

purchasing certain assets from persons related to the bank at a higher price than if purchased from unrelated persons;

selling certain assets to persons related to the bank at a lower amount than could be obtained by selling to unrelated persons;

investing in securities of persons related to the bank in cases where investments in securities of other legal entities are not made due to poor performance indicators or high risk levels;

accepting illiquid assets from persons related to the bank or accepting illiquid assets from persons related to the bank as credit collateral.
(Previous version. See.)
(Item 7 lost force based on the Resolution of the Board of the Central Bank of the Republic of Uzbekistan No. 30/10 dated December 13, 2019 (registration number 2706-3, 25.12.2019) — National Database of Legislative Acts, 25.12.2019, 10/19/2706-3/4196-no)

Chapter 2. Execution of Transactions with Persons Related to the Bank

8. Transactions with persons related to the bank may be carried out only with the permission of the Bank Council.

9. A Council member related to the bank must not participate in the discussion of transactions concluded between the bank and the following persons, or influence the Council's decision by other means:

the Council member related to the bank themselves;

the close relatives of the Council member related to the bank;

any legal entity of which the Council member related to the bank or their close relatives are major shareholders or exert significant influence;

any person acting on behalf of the persons listed in the second to fourth paragraphs of this paragraph.

10. The Council's decision on any transaction between the bank and a person related to the bank must be based on full disclosure of all relevant terms of the transaction.

11. For credit transactions, this information must include the credit amount, interest rate, the borrower's financial condition, financial information regarding their ability to repay the credit on time, and information on the secured amount of the credit.

12. Information regarding the purchase and sale of bank assets must include information confirming the value of the assets.

13. The Bank Council must maintain an accounting of permissions granted for concluding transactions with persons related to the bank.

14. After the Bank Council grants permission for the conclusion of a relevant transaction with a person related to the bank, this transaction is considered in the established order.

15. Investments made in legal entities related to the bank must be periodically re-evaluated and monitored like investments made in unrelated persons.

Chapter 3. Maximum Level of Risk Attributable to Persons Related to the Bank

16. The maximum level of risk attributable to a single person related to the bank must not exceed 25 percent of the bank's Tier 1 capital.

17. The maximum level of risk attributable to all persons related to the bank must not exceed 100 percent of the bank's Tier 1 capital.

18. In determining the sum of risk attributable to a single person related to the bank in accordance with paragraphs 16 and 17 of this Regulation, the following are taken into account: credit and credit lines, overdrafts, leasing, factoring, repos, swaps, all forms of modification of credit terms, provided guarantees and unpaid amounts under them, securities and investments of any kind, any legally grounded obligations to purchase securities or foreign currency, sale of assets with installment payment conditions, opening letters of credit, purchase of property, calculated interest, liabilities reflected in off-balance sheet items, and other financing-related transactions, as well as all amounts written off except in cases where they were cancelled as a result of declaring the debtor bankrupt.
    (Item 18, in the edition of the Resolution of the Board of the Central Bank of the Republic of Uzbekistan No. 14/16 dated June 24, 2017 (registration number 2706-1, 24.07.2017) — UR QHT, 2017, No. 30, Article 745)

19. The following are not taken into account when determining the maximum level of risk attributable to persons related to the bank:

profit received for participation in loans sold to other banks without a buyback obligation;

securities and guarantees whose market value can cover loans by 125 percent, secured by state securities, guarantees of the Government of the Republic of Uzbekistan, or other obligations;

loans refinanced by the bank using funds of the Recovery and Development Fund of the Republic of Uzbekistan;

deposit funds of the bank in another bank considered related to it, placed within the framework of usual agency relations where the Central Bank of the Republic of Uzbekistan may establish separate restrictions, as well as loans secured by deposits in the lending bank; (Fifth paragraph of item 19, in the edition of the Resolution of the Board of the Central Bank of the Republic of Uzbekistan No. 27/13 dated August 18, 2018 (registration number 2706-2, 06.09.2018) — National Database of Legislative Acts, 06.09.2018, 10/18/2706-2/1843-no) (Sixth paragraph of item 19 removed based on the Resolution of the Board of the Central Bank of the Republic of Uzbekistan No. 27/13 dated August 18, 2018 (registration number 2706-2, 06.09.2018) — National Database of Legislative Acts, 06.09.2018, 10/18/2706-2/1843-no)

20. Any credit granted to a person related to the bank or a person acting on their behalf must be secured with collateral at market value in the following amounts:

at least 100 percent of the credit when deposits in national currency are placed in the lending bank;

at least 105 percent of the credit when deposits in foreign currency are placed in the lending bank;

at least 125 percent of the credit when state securities are placed;

at least 130 percent of the credit when other collateral instruments are placed.
(Item 20, in the edition of the Resolution of the Board of the Central Bank of the Republic of Uzbekistan No. 27/13 dated August 18, 2018 (registration number 2706-2, 06.09.2018) — National Database of Legislative Acts, 06.09.2018, 10/18/2706-2/1843-no)

21. If the value of the collateral does not meet the requirements of paragraph 20 of this Regulation, the collateral must be changed or supplemented with collateral of a value that complies with the requirements of this Regulation.

Chapter 4. Accounting and Reporting

22. Each bank must submit a monthly report to the Central Bank regarding all transactions carried out with persons related to the bank or persons participating on their behalf.

23. The report must reflect the list of all operations carried out during the previous month and currently in effect as of the date of submitting the report. The report must include the full name of the related legal entity, the surname, first name, and patronymic of the related individual, the transaction amount, the terms of issuance and repayment, the types of credit collateral, and other terms provided for in the credit contract.

24. Each bank must form a list of close relatives and persons who may exert significant influence on one of the close relatives of its executive employees, as well as individuals who are major shareholders of the bank, once a year.

25. All reports and decisions of the Bank Council must be stored for 10 years.

Chapter 5. Final Provisions

26. In case of violation of the requirements of this Regulation by banks, the Central Bank has the right to apply measures and sanctions envisaged by the Law of the Republic of Uzbekistan "On Banks and Banking Activity".
    (Item 26, in the edition of the Resolution of the Board of the Central Bank of the Republic of Uzbekistan No. 30/10 dated December 13, 2019 (registration number 2706-3, 25.12.2019) — National Database of Legislative Acts, 25.12.2019, 10/19/2706-3/4196-no) (Collected Acts of the Republic of Uzbekistan, 2015, No. 31, Article 418; 2017, No. 30, Article 745; National Database of Legislative Acts, 06.09.2018, 10/18/2706-2/1843-no; 25.12.2019, 10/19/2706-3/4196-no)