Regulations on Unsafe and Unsound Banking Activities

Regulation of the Central Bank of the Republic of Uzbekistan, registered on 11.02.1999, registration number 628

Date of entry into force

11.02.1999

All

30.12.2019

11.02.1999

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Document lost its force 30.12.2019

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

APPROVED by the Central Bank of the Republic of Uzbekistan on November 9, 1998 (Protocol No. 19/7) No. 431

REGULATIONS ON UNSAFE AND UNSOUND BANKING ACTIVITIES

Regulation

[State registered by the Ministry of Justice of the Republic of Uzbekistan on February 11, 1999, No. 628]

This Regulation has lost its force on the basis of the Resolution of the Board of Directors of the Central Bank of the Republic of Uzbekistan No. 30/12 dated December 13, 2019 "On Recognizing Certain Regulatory Legal Documents Adopted by the Central Bank of the Republic of Uzbekistan as Having Lost Their Force" (registration number 3208, 30.12.2019).

1. GENERAL PROVISIONS

This Regulation is developed in accordance with the Law "On the Central Bank of the Republic of Uzbekistan" and establishes the concepts of unsafe and unsound banking activities.

Article 51 of the Law "On the Central Bank of the Republic of Uzbekistan" provides for the development of normative documents mandatory for banks to prevent violations in their activities. Article 53 of the aforementioned Law permits the Central Bank to take certain measures if violations committed or operations conducted by a bank pose a clear threat to the interests of bank investors and depositors.

2. PROHIBITION OF UNSAFE AND UNSOUND BANKING ACTIVITIES

3. Banks must not engage in unsafe and unsound banking activities.

4. Unsafe and unsound banking activities are considered to be actions or inactions that contradict generally accepted reasonable banking activity norms and may result in real risks to the interests of bank depositors, other creditors, and investors over a prolonged period.

5. The following may serve as examples of unsafe and unsound banking activities:

• conducting activities without sufficient competence or staff experience, policies, or measures;
• granting loans to borrowers without sufficient capacity to repay loans, without analysis and checks;
• granting loans to debtors with unsatisfactory credit history or those who have consistently failed to fulfill credit obligations at this or other banks;
• granting loans based on valuation reports where there is insufficient information and analysis confirming the value of collateral as indicated in the report;
• renewal or extension of terms for loans to debtors with unstable financial conditions;
• constant renewal or extension of terms for loans without collecting overdue interest;
• absence of a policy for loan repayment or its non-implementation;
• conducting investments or other operations with securities without significant risks to the bank's financial condition or without sufficient experience;
• keeping bank ledgers and records in violation of generally accepted accounting standards;
• submitting false reports to the Central Bank, failing to adequately diversify asset risks;
• paying excessively high salaries and bonuses to bank officials relative to the amount and position of bank capital;
• paying excessively high dividends relative to bank capital, profit trends, or asset quality levels;
• absence of internal control methods and audit activities, including lack of control over bank officials and employees;
• mismatch of capital levels to specific situations of the bank (type and quality of bank assets, types of activities, etc.);
• insufficient liquidity relative to the bank's mixed assets and liabilities;
• absence of sufficient provisions for possible losses on loans;
• conducting operations granting privileges to persons related to the bank.

4. The Central Bank may determine procedures for conducting other types of activities or operations recognized as unsafe and unsound based on evidence and information characterizing such activities and operations, specific circumstances, and an assessment of losses resulting from the implementation of these activities and operations, to ensure the safety of depositors' funds.

5. The Central Bank may apply measures and sanctions provided for by the legislation of the Republic of Uzbekistan against any bank engaged in unsafe and unsound activities.

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