Actual Risks of Uzbekistan’s Banking Sector

The Central Bank of Uzbekistan has released a report on the financial stability of the country and the banking sector for the first half of 2024. Kursiv Uzbekistan has analysed the main points of the document.

Stability of the banking system

From January to June 2024, the financial stability of Uzbekistan’s banking system was reported to be stable. The Total and Tier 1 capital adequacy ratios exceeded the minimum requirements, standing at 17.3% and 14.2%, respectively. The share of highly liquid assets in banks’ assets increased, and the level of unstable funding decreased.

Debts and loans

While the banking system’s stability was positive, concerns remain about households’ ability to meet their debt obligations. The level of debt burden on mortgage loans has remained almost unchanged. Additionally, there is concern about the rapid growth in the share of microcredits, which increased by 77% as of the first of July.

Results of stress tests

The main scenario of the macro stress test of the banking system’s solvency did not reveal any serious risks. However, some banks may fail to meet the minimum regulatory requirements in the adverse scenario. Nevertheless, the regulator does not expect short-term problems under the main liquidity scenario.

Economic and environmental risks

The Central Bank also considered the risks associated with climate change. External risks, such as potential sanctions against Uzbekistan’s financial sector and high expenditures on external financing, were noted. Domestic risks included inflated housing prices, accelerating growth of microcredit and cyber risks. The Central Bank stated that the overvaluation of housing prices, the rapid development of microcredits, and increased cyber risks are considered internal threats.

Kursiv Uzbekistan also reports that the Central Bank of Uzbekistan postponed a meeting on the key rate to the end of October.