Regulations on the Liquidation of Banks

Regulation of the Central Bank of the Republic of Uzbekistan, registered on 11.02.1999, registration number 626

Date of entry into force

11.02.1999

All

01.10.2020

28.02.2019

07.12.2017

10.06.2016

15.09.2014

19.05.2014

18.11.2010

01.04.2005

11.02.1999

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Document lost its force 01.10.2020

[
OKOZ:
1.
03.00.00.00 Civil Legislation / 03.03.00.00 Legal Entities / 03.03.02.00 Establishment, Reorganization and Liquidation of Legal Entities. State Registration of Legal Entities;
2.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.20.00.00 Establishment, Reorganization and Liquidation of Banks and Credit Organizations. Licensing of Banking and Credit Activities. Permitting Procedures]
[
TSZ:
1.
Civil Legislation. Entrepreneurship / Termination of Subjects of Entrepreneurial Activity. Sanitation and Bankruptcy; 2.
Finance / Banks and other credit institutions. Credits]

"APPROVED"

Resolution of the Board of the Central Bank of the Republic of Uzbekistan November 9, 1998, No. 240 (Protocol No. 19/7)

On the Liquidation of Banks

Regulation

[Registered by the Ministry of Justice of the Republic of Uzbekistan on February 11, 1999, registration number 626]

This Regulation ceases to be in force from October 1, 2020, based on the Resolution of the Board of the Central Bank of the Republic of Uzbekistan dated May 25, 2020, No. 12/5 "On Declaring Certain Regulatory Legal Acts Adopted by the Central Bank of the Republic of Uzbekistan as Invalid" (registration number 3253, June 30, 2020).

This Regulation establishes the procedure for the liquidation of banks in cases where the general meeting of shareholders has adopted a decision to voluntarily liquidate the bank, and the license granting the right to carry out banking operations has been revoked from the bank, in accordance with the Civil Code of the Republic of Uzbekistan, the Law of the Republic of Uzbekistan "On Banks and Banking Activity" and the Law "On Protection of Shareholders' Rights and Shareholders".

This Regulation does not apply to cases of liquidation in accordance with the court's decision to recognize the bank as bankrupt.

1. General Provisions

1.1. The following terms are used in this Regulation:

liquidation of a bank
— termination of banking activity without the transfer of rights and obligations to other legal and natural persons in the order of legal succession;

liquidator or liquidation commission
(hereinafter referred to as the liquidator) is appointed by the general meeting of shareholders in agreement with the Central Bank.

Specialists of the Central Bank and its territorial Main Directorate at the address where the bank is located may be included in the composition of the liquidation commission.

1.2. Banks are liquidated on the grounds and in the order provided for by the Civil Code of the Republic of Uzbekistan, taking into account the features established by banking legislation and this Regulation.
The purpose of the liquidation process is to promptly satisfy the claims of bank depositors and creditors.

1.3. A bank may be liquidated voluntarily or compulsorily (upon revocation of the license granted by the Central Bank for the bank to carry out banking operations).

Information about the revocation of the license must be published in the mass media, as well as on the official website of the Central Bank.

1.4. The following serve as the basis for the liquidation of banks:
a) revocation of the license for carrying out banking operations by the Central Bank; b) the decision of the general meeting of shareholders or founders (participants) to voluntarily liquidate the bank, provided that the permission of the Central Bank is available.

1.5. When a bank is liquidated, the license granting the right to carry out banking operations issued to it is revoked by the Central Bank.

1.6. The bank liquidation process is considered to begin from the day the Resolution of the Board of the Central Bank on the revocation of licenses is issued. The Resolution of the Board of the Central Bank on the revocation of licenses enters into force from the moment it is adopted.

The decision is handed over to the bank management (with a signature confirming receipt of this decision) on the day it is adopted.

1.7. After the decision to revoke the license granting the right to carry out banking operations is adopted, the Central Bank enters a record into the State Register of Banks Registration about the ongoing liquidation process in the bank.

1.8. The liquidator takes measures to identify creditors and collect debtor debts and funds deposited in the Mandatory Reserves Fund of the Central Bank of the Republic of Uzbekistan within two months from the day the license for carrying out banking operations is revoked. The specified funds are directed primarily to repay the debts of the liquidating bank to citizen depositors.

Funds held in the mandatory reserves account of the Central Bank of the liquidating bank are returned to the liquidation account of the bank opened at the Settlement and Cash Center under the Territorial Main Directorate of the Central Bank at the location of the liquidating bank within three days after the submission of a certificate by the liquidator confirming the start of the bank liquidation process.

1.9. From the day the Resolution of the Board of the Central Bank on the revocation of the license is adopted until the completion of the bank liquidation process, the following restrictions are established:
a) the powers of the general meeting of shareholders, other bodies, and officials of the bank, including the powers to dispose of property and settle obligations, as well as their right to manage the bank, are suspended. At the same time, the rights of the general meeting of shareholders to discuss the reports of the liquidator in an advisory manner, approve the liquidation balance sheet, and appoint and reappoint the liquidator are preserved; b) actions carried out in the name of the liquidating bank or at its expense may have legal force only if they are performed by the liquidator; c) all debt obligations of the bank are considered due; d) the calculation of interest on the obligations of the liquidating bank, including on contracts related to bank deposits and/or bank accounts, as well as penalties, is terminated; e) civil disputes of a property nature being considered in court with the participation of the bank are suspended, unless decisions on them have entered into legal force; f) all claims of a property nature belonging to the bank may be made only in the name of the liquidator and considered in the manner provided for by this Regulation and current legislation; g) decisions adopted by the court before the start of the liquidation process and enforcement documents of the court regarding property claims against the liquidating bank are submitted to the liquidation commission for execution in the order established by legislation.

1.10. The bank liquidation process consists of the following stages:
material control and inventory; verification of assets; valuation and sale of assets; placement of proceeds from sales; completion of the liquidation process.

1.11. The Central Bank must monitor the bank liquidation process. For these purposes, the Central Bank regularly receives reports from the bank on the valuation of bank assets, their liquidation, and the distribution of income.

1.13. The terms of payment for the activities of the liquidator, experts, and other persons involved in the liquidation process are recorded in the liquidation plan developed by the liquidator in the manner established by legislation.

1.14. All expenses related to the liquidation of the bank are carried out at the expense of this bank. Financial support for expenses related to the liquidation of banks by the Central Bank is not permitted.

Expenses related to liquidation are carried out out of turn in the performance of calculations on the obligations of the liquidating bank.

1.15. If the liquidator or members of the liquidation commission violate current legislation, the Central Bank has the right to demand the appointment of another liquidator or members of the liquidation commission.

1.16. Until the bank is liquidated, it remains under the control of the Central Bank, which has the right to inspect it.

1.17. The Central Bank may complain in the manner established by legislation regarding its refusal to approve the voluntary liquidation of the bank, as well as regarding the decision on the compulsory liquidation of the bank.

2. Voluntary Liquidation

2.1. Voluntary liquidation of a bank may be carried out in accordance with the Regulation on the Procedure for Passing Permitting Procedures in the Field of Banking Activity, approved by Resolution No. 56 of the Cabinet of Ministers of the Republic of Uzbekistan dated March 10, 2014, if the general meeting of shareholders (participants) of the bank, which has the opportunity to ensure the fulfillment of obligations to creditors and depositors, adopts a decision to voluntarily liquidate the bank.

2.3.4. After obtaining the permission of the Central Bank for voluntary liquidation, the liquidator must publish an announcement in the mass media, as well as on the corporate website of the bank, about the liquidation of the bank, including the procedure and deadlines for submitting applications from creditors regarding claims. The liquidator must also disclose information related to the adoption of a decision on liquidation in the securities market in the manner established.

2.3.5. After all required measures are taken, the liquidation commission must submit a report and the liquidation balance sheet to the Central Bank within 7 days after approval by the general meeting of shareholders.

3. Compulsory Liquidation

3.1. Compulsory liquidation of a bank is carried out based on the decision of the Central Bank to revoke the bank's license.

3.2. Compulsory liquidation of a bank based on the decision of the Central Bank to revoke the license is carried out on the following grounds:
a) insolvency of the bank due to liabilities exceeding assets; b) the establishment of the inaccuracy of the information on which the license was issued; c) the bank's inability to fulfill its obligations to its depositors or other creditors; d) systematic distortion of reporting information; e) carrying out banking operations contrary to the license conditions and legislation, posing a real threat to the interests of depositors and creditors; f) delay in carrying out banking operations for more than one year from the date the license was issued; g) violation of antimonopoly rules; h) revocation of the license of a foreign state bank that has established a branch bank on the territory of the Republic of Uzbekistan; i) violation of legislative acts on combating the legalization of proceeds from criminal activity and the financing of terrorism.

For the purposes of this Regulation, the following violations by the bank posing a real threat to the interests of depositors and creditors are included:
a) violation of current legislation and normative acts of the Central Bank; b) carrying out risky or unhealthy banking activity; c) intentional and prolonged non-compliance with the instructions of the Central Bank; d) concealment of documents or correspondence from Central Bank inspectors by the bank or refusal to submit documents required by the banking supervision service.

3.3. The banking activity is recognized as posing a real threat to the interests of depositors and creditors if:
the level of the capital adequacy coefficient of the bank is less than 75 percent of the economic norm established by the Central Bank; the bank suffers or may suffer potential losses in an amount exceeding 10 percent of the bank's regulatory capital in each of three consecutive quarters, or in any amount exceeding 50 percent of the regulatory capital regardless of time; other cases pose a real threat to the integrity of funds entrusted to the bank by depositors and creditors.

4. Powers and Obligations of the Liquidator

4.1. From the moment the liquidator is appointed, the authority to manage bank operations passes to him.

4.2. From the moment the liquidator is appointed, and in agreement with the Central Bank, the following obligations are imposed on him:
a) full control over bank assets and liabilities; b) responsibility for managing bank operations; c) sale of bank assets at a price that ensures the maximum satisfaction of creditors' claims; d) preparation and submission to the Central Bank of regular reports at least once every three months, detailing the liquidation process, including information on assets being sold.

4.3. The liquidator is responsible for damage caused to the bank as a result of illegal or intentionally incorrect actions (inaction) of the liquidator.

4.4. The liquidator is not liable for losses falling within the category of normative operational risks associated with liquidation.

4.5. The liquidator has the following rights:
a) identification of bank assets and their disposal within the framework of the powers of the property owner and the bank's management bodies, taking into account the purposes of liquidation; b) performing the functions of bank management in the name of the bank for the purposes of liquidation work and completion of bank activity; c) securing bank assets and property; d) taking measures to ensure the integrity of bank documents and property, as well as other property pledged as collateral; e) hiring staff from independent specialists for the implementation of the liquidation process, as well as hiring bank employees (from guards to qualified consultants) on a contractual basis at his own discretion. Bank creditors cannot be involved in this process as employees; f) setting wages and other payments to employees in accordance with labor legislation, taking into account the financial condition of the liquidating bank; g) participating in court in the name of the liquidating bank; h) the right to sell bank property if funds are insufficient to satisfy the claims of depositors and creditors; i) making claims in the name of the bank, establishing the legality of the claims of bank creditors, and satisfying claims recognized as legal.

4.6. Payments and other asset operations carried out with the aim of granting preference to one of the creditors or any person related to the bank during the last three months before the appointment of the liquidator may be recognized as invalid by the liquidator, except for the withdrawal of deposits, ordinary payments for wages, or other rewards. In this case, the liquidator applies to the court with a request to recognize the payment or other asset operation of the bank as invalid.

5. Material Control and Inventory

5.1. All incoming deposits and pledge receipts must be returned to the sender with a notice that the bank is being liquidated, without execution.

After the start of the liquidation process, the liquidator must organize the inventory of bank property and prepare an interim balance sheet.

5.2. From the moment the decision of the Central Bank on the liquidation of the bank is adopted, the liquidator must ensure physical control over bank assets. This implies:
a) ensuring the integrity of bank buildings and equipment using security services, police authorities, and other available means; b) transfer of valuable items, including cash, securities, vehicles, and works of art, to the disposal of the liquidator; c) replacement of door locks; d) replacement of the security service to control the use of bank documents and property.

5.3. If circumstances arise that raise suspicion of fraud or criminal activity (especially in foreign currency accounts), the liquidator must immediately inform the Central Bank to take appropriate measures.

5.4. All bank operations must be completed, including the inclusion of funds received to cover loans and inactive deposits taken before the start of the bank's liquidation process, in the auxiliary and other ledgers.

5.5. A final balance sheet must be prepared for the last working day of the bank.

5.6. The liquidator opens a special liquidation account "Bank X is being liquidated" at the Settlement and Cash Center of the Central Bank at the location where the bank is located. Foreign currency must be kept in separate liquidation accounts designated for them. Bank resources are transferred to these accounts. Only the liquidator has the exclusive right to use the liquidation accounts.

5.7. All proceeds from the sale of assets are kept in liquidation accounts.

5.8. The liquidator must establish special control over the bank's representative accounts, especially accounts in foreign banks. The liquidator must notify all republican and foreign financial institutions where bank funds are held that the bank is being liquidated and that the transfer of their funds can only be carried out with the permission of the liquidator. Such notifications must be given urgently. Before sending written notifications, recipients must be informed by phone. If the bank has branches or foreign account numbers, funds must be transferred via telegram to the liquidation account with the message "Bank X is being liquidated."

6. Verification of Assets

6.1. After the liquidator verifies the assets and sends the necessary notifications, he must prepare a liquidation report based on:
the final balance sheet; comparison of reports on the status of representative accounts; accounting of monetary funds and currency accounts; verification of equipment according to bank inventory lists; verification of creditor debts on the balance sheet and credit portfolio.

7. Valuation and Sale of Assets

7.1. Financial assets of the bank consist of:
monetary funds; loans; securities; currency resources.

7.2. Financial assets in the form of banknotes and coins in national and foreign currencies, and funds in bank representative accounts are valued at their nominal value.

7.3. The value of assets in the form of securities depends on the situation in the securities market.

7.4. The bank's credit portfolio is liquidated by selling the granted loans to a third party or by other means that allow for the collection of funds on these debts.

7.5. Loans described as "standard loans" must be sold at market price. If loans described as "standard loans" are sold at a price lower than their nominal value, the liquidator is obliged to justify these prices in the liquidation report. In this case, the nominal value of the loan is determined as of the date of sale and consists of the unpaid part of the loan, as well as the sum of interest accrued and not received on it.

7.6. In the sale of problematic loans, the liquidator must follow the following recommendations:

7.6.1. The loan value is equated to its nominal value. Such loans are usually purchased by banks and other financial companies.

7.6.2. For the sale of problematic loans, methods such as contract sale to individual buyers, private competitive auctions among a selected group of participants, and public auctions are used.

7.6.3. In cases where there is no opportunity to sell loans to other buyers, they may be sold to the debtor themselves at a price lower than the nominal value. The liquidator must justify each such case in the liquidation report.

7.6.4. If there is no opportunity to sell problematic loans, the liquidator takes measures to sell the pledged property or applies to court with a claim regarding the debtor's insolvency.

7.7. Non-financial assets include:
buildings and structures; transport vehicles; works of art; office equipment; furniture, equipment, and other property of the bank.

7.8. Non-financial assets are valued with the participation of an appraisal organization by the liquidator. The liquidator studies all information and factors affecting the price of non-financial assets and determines the estimated sale price based on them. Buildings, structures, and transport vehicles are valued in accordance with the established requirements for real estate appraisal.

7.9. After the valuation of non-financial assets, the liquidator notifies potential buyers that the sale of assets is planned or sells the bank's property in cases provided for by legislation and this Regulation.

7.10. During negotiations with buyers, the initial price of non-financial assets being sold may change. If the asset is sold at a price significantly lower than the accounting value, the liquidator must document the reasons for this occurrence. The specified documents are reflected in the report and attached to it.

8. Satisfaction of Claims of Depositors and Creditors

8.1. Within two working days after appointment, the liquidator must publish an announcement in the mass media, as well as on the corporate website of the bank, about the liquidation of the bank, including the procedure and deadlines for submitting applications from creditors regarding claims. The deadline for submitting claims is 2 months from the date the notice of the bank's liquidation is published, after which the liquidator does not accept claims.

The liquidator must also disclose information related to the adoption of a decision on liquidation in the securities market in the manner established.

8.2. The liquidator notifies all creditors and depositors in writing about the start of bank liquidation work. In this case, the liquidator indicates the amount of debt or deposit recorded in their personal accounts in the notice.

8.3. The notice states the deadline for filing claims by the liquidator. After this deadline expires, claims are not accepted or considered.

8.4. If there are mutual obligations between creditors and the liquidating bank, set-off is permitted.

8.5. Set-off is carried out provided that the following requirements are met:
set-off is permitted only for obligations that have reached the payment date; no objections are raised regarding any obligation; both parties must have the right to collect and pay the debt; automatic set-off is not permitted, parties must apply to each other with an application; set-off of obligations in different currencies is carried out at the exchange rate of the Central Bank on the day of its execution; if persons related to the bank do not fulfill their obligations to the bank, claims are made against them as against other debtors of the bank; set-off of obligations related to loans granted to related persons is not permitted; the obligation of a shareholder to pay the share capital to the bank cannot be offset against other obligations of the bank to this shareholder.

The priority of satisfying claims of depositors and creditors is taken into account in set-off.

8.6. When a bank is liquidated, the claims of its creditors are satisfied in the manner established by current legislation.

Depositors who are natural persons have priority in withdrawing their deposits from the proceeds arising from liquidation.

8.7. If the property of the liquidating bank is insufficient to fully satisfy all claims of the first queue, existing funds are distributed among creditors in accordance with current legislation.

8.8. Satisfaction of creditors' claims may be refused in the following cases:
a) if the applications were received after the specified deadline; b) if they are found to be unfounded by the liquidator.

8.9. After the expiration of the deadline for creditors to submit claims, the liquidator must take the following measures regarding the satisfaction of creditors' claims:
compilation of a list of accepted claims; rejection of claims not approved by the liquidator; determination of the amount of each creditor's debt and the sequence of claim payments; notification of the creditor about the acceptance or rejection of their claims; preparation of an interim balance sheet.

8.10. A written notice is sent to the address of creditors regarding the rejection of their claims.

8.11. If a creditor's claim is rejected or consideration of it is refused, the creditor may file a lawsuit in court against the liquidator.

8.12. If the funds of the bank being liquidated are insufficient to satisfy creditors' claims, the liquidation commission sells the bank's property through auction sales in the manner prescribed for the enforcement of court decisions.

8.13. Unpaid claims of creditors are considered paid due to the insufficiency of the property of the bank being liquidated.

Furthermore, if the creditor has not filed a lawsuit in court, claims not recognized by the liquidator and claims whose satisfaction was rejected by a court decision are considered paid.

8.14. After the satisfaction of creditors' claims, the remaining property of the bank is transferred to the bank's shareholders for distribution in the manner prescribed by legislation.

9. Completion of the Liquidation Process

9.1. After the completion of liquidation activities, the liquidator prepares a final report on the work performed and a liquidation balance sheet.

9.2. The liquidator submits the following documents to the Central Bank:

• a report on the work performed by the liquidation commission;
• a protocol of the general meeting of shareholders (participants) on the liquidation of the bank (in the case of voluntary liquidation);
• copies of announcements on the liquidation of the bank published in mass media;
• a decision on the formation of the liquidation commission;
• the balance sheet of the bank on the last day of its operations;
• a liquidation (zero) balance sheet;
• a liquidation (zero) balance sheet for off-balance sheet accounts;
• an act regarding the allocation of bank documents and archives for destruction;
• an acceptance-transfer act for the storage of documents and data in the bank's electronic database in the archive;
• a document confirming the destruction of the bank's seals and stamps.

9.3. The Central Bank reviews the submitted documents and adopts a decision on the removal of the bank from the State Register of Banks.

9.4. The Central Bank, in accordance with the Regulation on the Unified State Register of Enterprises and Organizations approved by Resolution No. 274 of the Cabinet of Ministers of the Republic of Uzbekistan dated September 25, 2012, sends a notification to the state statistics bodies regarding the liquidation of the bank.

The bank is considered liquidated from the moment it is removed from the State Register of Banks.

9.5. After the bank is liquidated, its archive, including documents on the operations of the liquidation commission, is transferred to the state archive at the location of the bank in the prescribed manner.

Deputy Chairman of the Central Bank of the Republic of Uzbekistan A.Kh. ERDANAYEV

Appendix 1

to the Regulation

RECOMMENDATION

Upon appointment, the liquidator must immediately take appropriate measures to prevent the unauthorized use of assets by bank employees and shareholders. In this regard, the liquidator must perform the following:

1. Establish physical control over the bank building.

2. Collect keys from all employees.

3. Seal all rooms of the bank.

4. Count cash in the cash register.

5. Count checks and securities.

6. Seal the bank's insurance policies, management protocols, and audit accounts.

7. Restrict bank employees' access to the bank vault.

8. Seal collateral and record loan debts.

9. Assign an employee to monitor the bank vault until the bank's internal security service arrives and locks and combinations are changed.

10. Call security service employees and a locksmith.

11. Notify the post office.

12. Notify utility services.

13. Notify representative banks via fax or telegram.

14. Inspect the bank's property located outside the building, including light vehicles and credit cards.

15. Post an announcement on the bank's doors regarding its liquidation.

With amendments and additions introduced by Resolutions No. 12/15 (registration number 626-3, May 12, 2014), No. 25/4 (registration number 626-4, September 10, 2014), and No. 32/21 (registration number 626-6, December 6, 2017) of the Board of the Central Bank of the Republic of Uzbekistan dated April 19, 2014, August 9, 2014, and November 25, 2017, respectively, and Resolutions No. 3-A/2 (registration number 626-1, March 22, 2005), No. 34/13 (registration number 626-2, November 8, 2010), and No. 8/12 (registration number 626-5, April 18, 2016) dated March 12, 2005, October 23, 2010, and March 26, 2016, respectively.