Why funds, insurers and banks in Uzbekistan face concentration limits, what ZRU-392 and the insurance and CBU rules say, and how to measure concentration.
In short
Concentration limits cap the damage from one failure, the risk of being unable to sell and conflicts of interest.
Uzbek law limits how much an investment or mutual fund may hold in one issuer and how much it may borrow.
Insurance regulations limit deposits per bank, stakes in one entity and assets placed with related parties.
Each limit is measured against its own base, such as net assets, total assets or Tier 1 capital, so record the base.
Group exposures by issuer or banking group, count deposits, and watch for breaches caused by price moves alone.
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Every institutional investor in Uzbekistan that manages other people's money works under some version of the same rule: do not put too much in one place. Investment funds, insurers and banks each have limits on how much they may hold in one issuer, one bank or one company. The numbers differ because the risks differ, and so do the amounts the limits are measured against. This guide explains why concentration limits exist, what the main Uzbek rules say as published on lex.uz, and how professionals measure concentration in practice.
Why concentration limits exist
A concentration limit protects three groups of people from three kinds of loss.
Beneficiaries from a single failure. If one issuer defaults or one bank has its licence revoked, the damage to the portfolio is capped at the limit. The diagram below shows the arithmetic with equal holdings.
Clients from being unable to leave. A large stake in a thinly traded security cannot be sold quickly. On a market where many shares trade rarely, concentration and liquidity risk are closely linked.
Everyone from conflicts of interest. Limits on related parties stop an institution's money being steered to its owners or managers.
One share halves: the loss depends on how many you hold
Portfolio loss, %
The diagram uses illustrative figures: if one of several equal holdings halves and the rest do not move, the portfolio loses 50% with one holding, 10% with five and 2.5% with twenty. Diversification and risk explains the idea for individual investors; limits turn it into a rule.
Investment and mutual funds: ZRU-392
The Law "On investment and mutual funds" (ZRU-392 of 25 August 2015) sets the limits for collective investment schemes (lex.uz, read 28 September 2026). Under article 13, an investment fund may not:
invest more than 10% of its net assets in the securities of one issuer or in stakes of one limited liability company;
borrow if its total debt would exceed 15% of net assets on the date of the loan agreement, and any loan may run for no more than three months;
acquire or hold shares of other investment funds;
invest more than 10% of net assets in total in anything other than securities.
Article 19 sets matching rules for a mutual fund: no more than 10% of the fund's investment assets in one issuer's securities or one limited liability company, and no more than 10% in total outside securities.
Insurers work under regulations issued by the Ministry of Finance, which remain in force on lex.uz.
The regulation on the solvency of insurers and reinsurers (No. 1806 of 12 May 2008, lex.uz, read 28 September 2026) includes these limits:
deposits in one commercial bank at most 40% of the insurer's assets;
deposits in credit organisations other than commercial banks at most 10% of assets in total;
at most 50% of assets in one plot of land or other property;
at most 30% of assets placed in the charter capital of, or other participation rights in, one legal entity;
a stake in any one entity at most 30% of that entity's charter capital, with stated exceptions;
all stakes in other entities' charter capital at most 50% of the insurer's own funds, with an exception for certain commercial banks;
assets placed with one related party at most 15% of the insurer's charter capital, and with all related parties at most 100%.
The regulation on insurance reserves (No. 1882 of 15 December 2008, lex.uz, read 28 September 2026) adds a composition rule: at least 70% of the assets set aside to cover reserves must be in government securities of Uzbekistan, bank deposits, cash, foreign government securities (with the regulator's agreement) or securities admitted to circulation under Uzbek law.
Banks: stakes measured against Tier 1 capital
For banks, a Central Bank regulation on acquiring property and stakes in legal entities (registered 8 June 2023, No. 3441, lex.uz, read 28 September 2026) sets two limits on equity participations. A stake in the charter capital of one legal entity may not exceed 15% of the bank's Tier 1 regulatory capital, and all such stakes together may not exceed 50% of Tier 1 capital.
The denominator matters
Notice how many different bases appear above: a fund's net assets, an insurer's total assets, its own funds, its charter capital, the charter capital of the company invested in, and a bank's Tier 1 capital. A limit check is only as good as its denominator. Three practical consequences follow:
Record the base with each limit, not just the percentage.
Use the same valuation as the rule. The reserve regulation, for example, measures the assets set aside at their balance sheet value.
Update the base. A limit expressed against capital moves when the capital figure changes, even if the holding does not.
What each limit is measured against
Investment and mutual funds
An investment fund: its net assets
A mutual fund: its investment assets
Insurers
Bank deposits, property and participations: total assets
A stake in one entity: that entity's charter capital
All stakes together: the insurer's own funds
Related parties: the insurer's charter capital
Banks
Stakes in legal entities, one and all together: Tier 1 regulatory capital
Measuring concentration beyond the legal limits
Legal limits are a floor. Boards usually also watch a few simple measures:
Largest position as a share of the portfolio.
Top five positions combined.
Herfindahl-Hirschman index (HHI): the sum of the squared weights of all positions. A portfolio in one position has an HHI of 1; ten equal positions give 0.10.
Effective number of holdings: 1 divided by the HHI.
The figures in this example are illustrative. A book holds five positions weighing 40%, 20%, 15%, 15% and 10%. Its HHI is 0.40² + 0.20² + 0.15² + 0.15² + 0.10² = 0.16 + 0.04 + 0.0225 + 0.0225 + 0.01 = 0.255, so it behaves like about 3.9 equal holdings, not five.
Two refinements matter in Uzbekistan. First, group exposures by issuer or banking group, not by instrument: a bank's shares, its bonds and a deposit with it are one exposure for internal risk purposes, even if the rules count them separately. Second, count deposits, because for many insurers and bank treasuries the largest single exposure is a bank, not a share. Bank deposits vs bonds compares the two instruments.
Passive breaches
Limits can be broken without any trade. The figures here are illustrative. A fund holds one issuer at 9.5% of net assets. The share rises 20% while everything else is flat. The position grows to 11.4 and the total to 101.9 (per 100 at the start), so the weight becomes about 11.2%, above a 10% limit.
Whether a limit applies only at the time of purchase or at all times, and how long an institution has to correct a breach caused by price moves, depends on the wording of the rule and the regulator's practice. Read the rule, write your interpretation into the investment policy, and have the board approve it. Check limits on a schedule, record each check and its result, and keep the evidence.
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Frequently asked questions
Under article 13 of ZRU-392, an investment fund may not invest more than 10% of its net assets in the securities of one issuer or in stakes of one limited liability company. Article 19 sets a 10% limit for a mutual fund, measured against the fund's investment assets.
The solvency regulation No. 1806 limits deposits in one commercial bank to 40% of the insurer's assets, and deposits in credit organisations other than commercial banks to 10% of assets in total.
Under Central Bank regulation No. 3441, a bank's stake in one legal entity may not exceed 15% of its Tier 1 regulatory capital, and all such stakes together may not exceed 50% of Tier 1 capital.
The Herfindahl-Hirschman index is the sum of the squared weights of all positions. It captures concentration across the whole portfolio in one number, and 1 divided by the HHI gives the effective number of equal holdings.
This article is for education only and is not investment advice. Investing in securities involves risk, including the loss of money you invest.
Key terms in this post
Issuer
The company or government that issued a share or a bond and has obligations to its holders.
Default
When a borrower, such as a bond issuer, fails to pay interest or repay the debt on time.
