IMPROVEMENT OF CORPORATE GOVERNANCE IN COMMERCIAL BANKS USING THE PRINCIPLES OF BASEL COMMITTEE ON BANKING SUPERVISION (BCBS)

ISSN: 3030-3931, Impact factor: 7,241 Volume 10, issue 1, Oktabr 2025 https://worldlyjournals.com/index.php/Yangiizlanuvchi worldly knowledge OAK Index bazalari : research gate, research bib. Qo’shimcha index bazalari: zenodo, open aire. google scholar. Original article 1759 IMPROVEMENT OF CORPORATE GOVERNANCE IN COMMERCIAL BANKS USING THE PRINCIPLES OF BASEL COMMITTEE ON BANKING SUPERVISION (BCBS) Abdumovlanov Asilbek Abdumalik o'g'li Toshkent davlat iqtisodiyot universiteti, Korporativ Boshqaruv yo'nalish 3-bosqich talabasi e-mail: [email protected], +998 88 105 99 11 Misayev Behruz Odilovich Toshkent davlat iqtisodiyot universiteti, Korporativ Boshqaruv yo'nalish 3-bosqich talabasi e-mail: @[email protected], +998 91 192 43 46 Abstract: This paper is about making banks in Uzbekistan better by using ideas from the Basel Committee on Banking Supervision (BCBS). We looked at Asaka Bank JSC to see how it's going. Since 2020, Uzbekistan has been trying to follow BCBS standards, especially with new banking rules. We saw that Asaka Bank JSC is getting better at things like having responsible leaders, managing risks well, being open, and paying people fairly. It seems Uzbekistan's banking system is heading in the right direction, but it still needs to work on watching things closely and encouraging a culture of being careful. Keywords: Corporate Governance; Basel Committee on Banking Supervision (BCBS); Banking Reform; Asaka Bank; Uzbekistan; Risk Management; Transparency; Board Independence; Financial Supervision; Privatization; OECD Principles; Central Bank of Uzbekistan; Compliance. Introduction Since the late 2010s, Uzbekistan has been working to update its banking system. An important part of this is better corporate governance, basically, better management. The Basel Committee on Banking Supervision (BCBS) makes rules that are used around the world to keep banks safe and make sure they're run well. In 2020, Uzbekistan started making changes to its banks to match these international rules. This included things like having boards that are independent, watching risks carefully, and being clear about what's going on. They wanted state-owned banks to get ready for privatization and follow Basel standards. This study looks at how BCBS rules have helped banks in Uzbekistan get better, using Asaka Bank JSC as an example. Asaka Bank is one of the biggest state-owned banks in the country. Literature Review Corporate governance in the banking sector has become a central theme in global financial reform, particularly following the 2008 financial crisis. The Basel Committee on Banking Supervision (BCBS) established a set of Corporate Governance Principles for Banks (2015), emphasizing board accountability, risk management, transparency, and compensation policies. These principles have been widely adopted to ensure financial stability and sound management practices across jurisdictions. According to OECD (2023), strong governance frameworks are vital for protecting stakeholders and maintaining market trust. The G20/OECD Principles of Corporate Governance further ISSN: 3030-3931, Impact factor: 7,241 Volume 10, issue 1, Oktabr 2025 https://worldlyjournals.com/index.php/Yangiizlanuvchi worldly knowledge OAK Index bazalari : research gate, research bib. Qo’shimcha index bazalari: zenodo, open aire. google scholar. Original article 1760 stress the importance of independent oversight, effective disclosure mechanisms, and alignment of executive incentives with long-term institutional health. In the context of developing economies, the World Bank (2022) highlights that effective corporate governance helps banks strengthen internal control systems, attract investment, and prepare for privatization. In particular, countries undergoing transition—such as Uzbekistan— face challenges in adapting international standards to local institutional realities. The Central Bank of Uzbekistan (CBU) has been proactive in implementing reforms under the Banking Sector Reform Strategy (2020), aligning local regulations with BCBS guidelines. Studies show that state-owned banks, such as Asaka Bank JSC, have increasingly incorporated BCBS principles into their governance practices—enhancing transparency, risk culture, and board independence (Asaka Bank JSC, 2023). However, gaps remain. Full compliance with BCBS standards often requires deeper cultural and structural adjustments, especially in areas of independent oversight and risk-based compensation systems. Decree No. PQ-4720 (2020) underscores Uzbekistan’s commitment to improving governance quality, but continuous supervision and external evaluation are necessary to ensure sustainability of reforms. In sum, existing literature suggests that the application of BCBS principles provides a solid foundation for modernizing Uzbekistan’s banking system. While substantial progress has been achieved, particularly in risk management and disclosure, full convergence with international norms will depend on long-term regulatory consistency and institutional capacity-building. Methods This research employs a qualitative case study method using document analysis of: The Regulation on Corporate Governance in Commercial Banks of the Republic of Uzbekistan; The Charter, Supervisory Board Regulation, and Management Board Regulation of Asaka Bank JSC (2023–2025); Official data from the Central Bank of Uzbekistan (CBU) and BCBS official publications. The analysis compares Uzbekistan’s regulatory provisions and Asaka Bank’s internal governance practices against key BCBS principles, focusing on four dimensions: Board Responsibilities and Independence, Risk Management and Oversight, Transparency and Disclosure,Compensation and Risk Culture ISSN: 3030-3931, Impact factor: 7,241 Volume 10, issue 1, Oktabr 2025 https://worldlyjournals.com/index.php/Yangiizlanuvchi worldly knowledge OAK Index bazalari : research gate, research bib. Qo’shimcha index bazalari: zenodo, open aire. google scholar. Original article 1761 Results Legislative and Institutional Reforms Following the 2020 Banking Sector Reform Strategy, all commercial banks in Uzbekistan were required to enhance their governance frameworks, mirroring BCBS’s focus on risk management, board accountability, and transparency. Subsequent reforms, including updates to the Regulation on Corporate Governance in Commercial Banks, enhanced board independence and risk oversight by requiring the inclusion of independent directors, risk committees, and compliance with Basel Core Principles. Moreover, Uzbekistan established mechanisms for independent governance assessments and privatization preparations, aligning with BCBS’s call for robust supervisory roles and continuous monitoring. Case Study: Asaka Bank JSC Founded in 1995, Asaka Bank JSC is one of Uzbekistan’s largest state joint-stock commercial banks, with a strong corporate franchise and branches across the country. The bank’s governance system includes a Supervisory Board, a Management Board, committees, and internal audit functions, all structured according to the Regulation on Corporate Governance in Commercial Banks. a. Board Responsibilities and Independence The bank ensures the board’s overall responsibility for risk management and strategic oversight, allowing for competent member selection and independence. It includes independent directors as required by regulations, aligning with BCBS Principle 1: Board’s Overall Responsibilities and Principle 2: Board Qualifications, Composition, and Structure. However, the proportion of independent members is increasing as part of privatization reforms, though still below global recommendations. b. Risk Management and Oversight Asaka Bank has implemented risk management functions, including three lines of defense (business units, risk teams, internal audit), reflecting BCBS Principles 6–8 on risk functions, identification, and communication. The bank participates in EBRD-assisted reforms to strengthen risk culture and oversight. c. Transparency and Disclosure The bank publishes annual reports, financial statements, and governance assessments through official channels, in line with the Regulation on Corporate Governance and BCBS Principle 12 on Disclosure and Transparency. The Supervisory Board oversees compliance with International Financial Reporting Standards (IFRS). d. Compensation and Risk Culture ISSN: 3030-3931, Impact factor: 7,241 Volume 10, issue 1, Oktabr 2025 https://worldlyjournals.com/index.php/Yangiizlanuvchi worldly knowledge OAK Index bazalari : research gate, research bib. Qo’shimcha index bazalari: zenodo, open aire. google scholar. Original article 1762 The compensation system for board members and executives is linked to performance, riskadjusted metrics, and long-term goals, consistent with BCBS Principle 11 on Compensation. Regulations require annual reviews to reinforce a sound risk culture. Dimension BCBS Principle(s) Asaka Bank Implementation Compliance Level Board Responsibilities and Independence Principle 1: Board’s Overall Responsibilities; Principle 2: Board Qualifications, Composition, and Structure Supervisory Board oversees strategy and risk; includes independent directors; proportion increasing with privatization reforms High (Increasing independence needed) Risk Management and Oversight Principles 6–8: Risk Functions, Identification, and Communication Implemented three lines of defense; risk committees; EBRD-assisted reforms for risk culture High Transparency and Disclosure Principle 12: Disclosure and Transparency Publishes annual reports and financial statements; complies with IFRS; official channel disclosures Very High Compensation and Risk Culture Principle 11: Compensation Performance-linked, riskadjusted remuneration; annual reviews to promote sound risk culture Medium (Deeper integration required) Analysis and Discussion The integration of BCBS principles into Uzbekistan’s banking governance framework represents a hybrid model — combining local regulatory traditions with international best practices. While the Regulation on Corporate Governance serves as the bridge between global standards and national enforcement, practical implementation varies among banks. ISSN: 3030-3931, Impact factor: 7,241 Volume 10, issue 1, Oktabr 2025 https://worldlyjournals.com/index.php/Yangiizlanuvchi worldly knowledge OAK Index bazalari : research gate, research bib. Qo’shimcha index bazalari: zenodo, open aire. google scholar. Original article 1763 Figure 2: Compliance Level of Asaka Bank JSC with BCBS Principles. Asaka Bank demonstrates high compliance in transparency and risk management, reflecting its alignment with reform requirements for disclosure and oversight. However, full independence in board composition and deeper risk culture integration remain areas for improvement as privatization advances. Another key observation is the bank’s use of independent evaluations and EBRD support, which fulfills BCBS’s call for supervisory roles. Yet, ongoing reforms suggest incomplete integration of broader principles like group structures and compliance functions. Conclusion The application of BCBS principles to improve corporate governance in Uzbekistan’s commercial banks has strengthened risk management, transparency, and board accountability across the sector. Asaka Bank JSC illustrates how these principles are operationalized in practice through clear regulations, oversight bodies, and strategic alignment. Nevertheless, the journey toward full compliance with BCBS standards continues. Enhancing board independence, deepening risk culture, and expanding supervisory evaluations will be essential for Uzbekistan’s banks to match global banking governance standards. References: 1. Basel Committee on Banking Supervision (BCBS). Corporate Governance Principles for Banks. Basel, Switzerland: Bank for International Settlements, 2015. Available at: https://www.bis.org/bcbs/publ/d328.htm 2. Decree of the President of the Republic of Uzbekistan No. PQ-4720. On Measures to Further Improve the Corporate Governance System. May 24, 2020. Available at: https://lex.uz/docs/4827621 3. Central Bank of Uzbekistan. Banking Sector Reform Strategy. Tashkent, 2020. Available at: https://cbu.uz/en/ ISSN: 3030-3931, Impact factor: 7,241 Volume 10, issue 1, Oktabr 2025 https://worldlyjournals.com/index.php/Yangiizlanuvchi worldly knowledge OAK Index bazalari : research gate, research bib. Qo’shimcha index bazalari: zenodo, open aire. google scholar. Original article 1764 4. Asaka Bank JSC. Charter of the Company. Tashkent, 2023. 5. Asaka Bank JSC. Corporate Governance Code of Asaka Bank JSC. Tashkent, 2023. 6. Central Bank of Uzbekistan. Regulation on Corporate Governance in Commercial Banks. Tashkent, 2022. 7. OECD. G20/OECD Principles of Corporate Governance. Paris: OECD Publishing, 2023. Available at: https://www.oecd.org/corporate/principles-corporate-governance.htm 8. World Bank. Uzbekistan: Enhancing Corporate Governance and Transparency in the Banking Sector. Washington, D.C.: World Bank, 2022. Available at: https://documents.worldbank.org/en/publication/documents-reports