TASHKENT, Uzbekistan, August 13. As part of its broader economic transformation, Uzbekistan is steadily advancing reforms in its banking sector aimed at strengthening financial supervision, enhancing institutional independence, and aligning with international best practices, Trend reports, citing the latest IMF report.
Since the adoption of the revised Central Bank Law in 2019, the Central Bank of Uzbekistan (CBU) has gained greater autonomy, with a clear mandate to maintain price stability and ensure the safety and soundness of the banking system. This legislative change marked the beginning of a gradual but resolute effort to modernize the country’s financial regulatory framework.
The Government’s Banking Sector Reform Strategy, launched in 2020, laid the groundwork for privatizing state-owned commercial banks and introduced a competitive operational model. Building on this progress, the CBU adopted its Guidelines on Risk-Based Supervision (GRBS) in December 2023 — a major milestone signaling a shift from compliance-driven oversight to a forward-looking, risk-sensitive supervisory approach.
The new supervisory methodology was piloted on four banks in 2023, expanded to 14 banks in 2024, and is expected to cover all 36 banks operating in Uzbekistan by 2025. However, this transition remains complex and resource-intensive. Supervisory staff are still developing expertise with the new approach, and achieving consistency in evaluations across teams continues to be a challenge.
At the legislative level, several significant reforms are currently under parliamentary consideration. These include the creation of a Financial Stability Board, with the CBU designated as the Resolution Authority, and reforms to the deposit insurance system. Notably, deposit protection would be extended to legal entities with coverage capped at 200 million soums ($18500), and compensation timelines would be shortened to seven days, critical steps toward boosting public confidence and enhancing the sector’s resilience.
Nevertheless, challenges remain. While the CBU’s independence is guaranteed by law, its autonomy is partially constrained by other regulatory mechanisms. For instance, the Law on Normative Legal Acts requires the CBU to obtain approvals from the Chamber of Commerce and Industry and the Ministry of Justice before issuing new regulations — a process that can hinder timely responses to emerging risks. Additionally, the Chamber’s representation of private sector interests may present potential conflicts in the regulatory process.
Further strengthening of the supervisory framework is necessary. Climate-related risks and operational resilience have yet to be fully incorporated into supervisory assessments. Consolidated supervision — essential for overseeing banking groups and affiliates- has not yet been implemented. Off-site supervision, particularly in corporate governance, remains underdeveloped, and supervisory reporting standards are not fully aligned with international accounting norms.
Although Uzbekistan has officially committed to transitioning to the Basel III framework, this process is not complete. Capital definitions and risk-weighting methodologies still diverge from Basel standards, and key capital instruments such as subordinated debt may not meet loss-absorption criteria. The identification of seven domestic systemically important banks (D-SIBs) represents progress, but additional capital buffers and resolvability assessments have yet to be introduced.
Simultaneously, the CBU is working to enhance risk management practices across the banking sector. New regulatory amendments, effective April 2025, will expand the definition of market risks, elevate interest rate risk in the banking book as a standalone category, and introduce more rigorous risk appetite frameworks. However, implementation is still in its early stages.
Operational continuity oversight is another area needing improvement. The CBU has yet to assess banks’ capacity to maintain critical operations during disruptions, and there are no formal regulations addressing outsourcing or third-party risks, important gaps given the growing digitalization and interconnectedness of the financial system.
To address these structural weaknesses, a new draft law on the resolution and liquidation of banks is under preparation. It aims to define clear crisis management protocols and institutionalize the CBU’s role in managing systemic risks. This law is expected to provide a solid legal foundation for recovery planning, particularly for systemically important institutions.
Overall, Uzbekistan’s banking reforms are moving in the right direction, but further legal, regulatory, and institutional enhancements are essential. Strengthening supervisory independence, fully implementing risk-based frameworks, and aligning with global standards will be vital to building a stable, resilient, and market-oriented financial system that supports sustainable economic growth.