On 12 July, the President of the Republic of Uzbekistan signed a resolution "On measures to further increase liberalization of banks and activate their participation in investments processes on modernization of economy".

The document was signed with the purpose of further raising the level of capitalization of Uzbek commercial banks, ensuring their wide participation in investment processes, structural reforms of economy, modernization, technical and technological re-equipment of productions.

In line with the presidential resolution, the following have been set as priority direction of further deepening reforms and liberalization in banking and finance system:

- raising the level of capitalization of banks due to increase of their charter capitals, issue and active floatation of shares in stock markets for attraction into the capital of banks of free money resources of the population, economic entities and potential investors, including foreign ones;

- wide participation of commercial banks in investment processes on creation of new modern production, as well as modernization, technical and technological re-equipment of existing enterprises, providing on this basis the expansion of manufacture of competitive, export oriented products and increase of the population employment;

- further reduction of off-banking circulation of cash money resources, uninterrupted and unconditional provision with cash on the first demand of clients;

- expansion of the network of mini banks and the range of services rendered by banks, increase of the quality of servicing clients;

- provision of commercial banks with professionally trained highly skilled staff, increase of responsibility and culture of bank servicing.

The President approved the proposal of the Central Bank and Finance Ministry of Uzbekistan to use a part of Central Bank’s profit on results of 2006, which should be put to state budget, for increase of charter capitals and expansion of resource base of investments:

• Microcreditbank – worth 42 billion soums, including 32 billion soums for increase of charter capital and 10 billion soums for opening credit line with focus on financing investment projects of small businesses;

• Pakhtabank – worth 25 billion soums, including 15 billion soums for increase of charter capital and 10 billion soums for opening credit line aimed at implementation of investment projects on deep processing of fruit and vegetable and cattle-breeding products;

• Ipotekabank – woth 25 billion soums, including 15 billion soums for increase of charter capital and 10 billion soums for opening credit line in order to enlarge volumes of mortgage crediting.

Commercial banks have been recommended to direct not less that 30% of their profits by the year end, after payment of all taxes and payments, to increase of the bank’s stock capital.

The resolution has given commercial banks the right until 1 January 2012 to reduce the taxation base on income (profit) tax by the sum of incomes received from giving credits for the period of more than three years for implementation of investment projects on modernization, technical and technological re-equipment and update of production in priority industries of economy in accordance with the approved target programmes.

An order has been established, according to which the IPO public placement in stock exchange of commercial banks’ shares is carried out worth at least 25% of the volume of newly issued shares into circulation (except for private banks); and the shares of commercial banks are compulsorily included in the listing of stock exchange with publication of regular quotes.

The resolution entrusted Finance Ministry to direct annually the resources allocated to the Mortgage Crediting Support Fund to coverage of negative margin between the interest rate on the resources attracted by the Fund in interbank market and the interest rate on preferential credit lines given by the Fund to commercial banks for support of preferential mortgage crediting.

Commercial banks shall be exempted from the payment of value added tax and income (profit) tax in case of transfer to their branches of inventory holdings, incomes and other resources. The payment source shall be exempted from taxes on interest and other payments made by commercial banks on credit lines of foreign financial institutions, attracted for financing of investment projects.

The customs and tax preferences, provided by the Resolution of the Cabinet of Ministers "On measures to further develop the system of settlements on the basis of plastic cards" dated 24 September 2004, shall be prolonged until 1 January 2010 in case of import and use of plastic cards, payment terminals, software, cash dispensers, information kiosks of self-service, other equipment and consumables used in payments by plastic cards.

The Central Bank of Uzbekistan jointly with the Uzbekistan Banking Association, interested ministries and departments, commercial banks have one month to prepare and approve a complex of measures on introduction of the system of national individual rating of commercial banks, financial institutions, issuers and the securities issued by them; as well as on attribution to commercial banks of creditability ratings of international rating agencies.