Abdurakhim Vakhabov, D.Sc. (Econ.), professor, rector of the Academy of Banking and Finance, Republic of Uzbekistan (Tashkent, Uzbekistan)

Tulkin Bobakulov, D.Sc. (Econ.), head of the Currency Circulation and Credit Chair, Academy of Banking and Finance, Republic of Uzbekistan (Tashkent, Uzbekistan)

1. Current State and Development Trends in Uzbekistans Banking System

Uzbekistan currently has a dual banking system which consists of the Central Bank and commercial banks.

As of 1 January, 2009, Uzbekistans banking system has 30 commercial banks, which include 3 state banks, 11 joint-stock commercial banks, 5 commercial banks with a share of foreign capital, and 11 private banks (the share of physical entities in the authorized capital of these banks is higher than 50%).

During its first years of independence, Uzbekistan did not have a special law on the Central Bank. The banking system functioned in compliance with the Law on Banks and Banking Activity adopted on 15 February, 1991 (1 September, 1991 is the day the country gained its independence). This law was improved by introducing various amendments and addenda into it, thus creating a legal foundation for establishing the Central Bank of Uzbekistan (CBU) based on the regional division of the U.S.S.R. State Bank.

At the initial stage of the countrys economic reform, the CBU performed such functions as servicing the governments accounts, controlling the activity of commercial banks, and organizing and managing the national payment system. But it did not issue money, since at that time Uzbekistan did not have its own national currency.

Introduction of the national currency, the soum, into circulation required conducting an independent monetary policy and presumed the need for intensifying the reforms in the financial sector. In addition, it became obvious that it was impossible to define the legal status, goals, and tasks of two entirely different institutionsthe CBU and commercial bankswithin the framework of one law. These factors made it necessary to regulate the activity of the CBU by means of a separate law.

Keeping in mind the proposals and recommendations of international financial institutions, foreign banks, and independent experts, the CBU drew up the draft of a Law on the Central Bank. This draft law was openly and extensively discussed by specialists, academic economists, and experts, who supplied numerous proposals and comments. Finally, on 21 December, 1995, at a regular session of the Olii Majlis (the countrys parliament), the Law on the Central Bank of the Republic of Uzbekistan was adopted.

According to Article 1 of this law, the CBU is a legal entity and all of its property is in federal ownership. This article also enforces its economic independence: The Central Bank is an.

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