The Central Bank of the Republic of Uzbekistan (the “CBU”) approved the “Regulation on the procedures and conditions for admission to banking activities” (the “Regulation”), which will come into force on October 1, 2020. After the adoption of the revised Law “On banking and banking activity” in November 2019 (the “Law”), gaps have appeared between the Law and subordinate laws. Specifically, the Law imposed stricter requirements, detailed procedures, and gave the CBU extensive powers. The Regulation not only eliminates these gaps but also combines several subordinate laws in one document.
Scope of the Regulation
The Regulation regulates the following issues:
- establishment of banks;
- preliminary approval of the purchase of bank shares (5% and more);
- approval of candidates to the supervisory board, management board, and the key personnel of banks;
- establishment of branches, representative offices and other separate subdivisions of banks;
- registration amendments to the charters of the banks; and
- reorganization and liquidation of banks.
These changes were discussed in our review of the Law that you can access through the following link.
Impact on foreign investors
The process of obtaining relevant permissions from the CBU for the establishment of banks in Uzbekistan and the purchase of the shares of local banks currently requires extensive disclosure of information on the applicant. Aside from other information, it should be noted that the absence of the minimum threshold of ownership and control for the identification of the ultimate beneficiary in the applicant is creating uncertainty.
The Law defines the ultimate beneficiary as an “individual that directly or indirectly owns the legal entity that is the potential purchaser or the direct or indirect owner of the shares of the bank, or controls it”. As per the Law, the CBU has an unlimited right to request additional documents, including documents required for the identification of the ultimate beneficiary. Practically, since there is no set minimum threshold of ownership and control for the ultimate beneficiary, the CBU may request information regarding each shareholder of the applicant until the CBU identifies the individual indirectly controlling or owning at least 1% of the bank.
Under Annex 7 to the Regulation, on the form of the disclosure of information on a beneficiary, the CBU now requires the disclosure of information on the ultimate beneficiary up to the third level in the corporate structure of the applicant. Foreign investors should use a structure of their companies that is understandable and transparent in order to simplify the procedure of the identification of the ultimate beneficiary by the CBU.