The Banking Supervision Committee convened a meeting on September 12, 2023, with a primary focus on ensuring the effective implementation of supervisory tasks by the Central Bank. During this meeting, a significant decision was reached concerning the state of concentration risk within the credit portfolios of banks.
The decision is aligned with the regulations outlined in the "Law of the Republic of Uzbekistan on Banks and Banking Activities," which mandates that banks must prioritize diversification of their assets to mitigate the risk of potential asset losses. Furthermore, the law empowers the Central Bank to strengthen requirements and impose restrictions on specific financial transactions if risks are identified that could significantly jeopardize the stability of banking activities.
One of the key concerns addressed during this meeting was the substantial increase in the proportion of car loans within the loan portfolios extended to individuals by commercial banks. This rise has contributed to the emergence of a concentration risk, amplifying the potential financial losses associated with this sector and its impact on the stability of commercial banks.
In response to these challenges and in pursuit of safeguarding the interests of depositors and creditors, the Central Bank has issued precise directives to commercial banks. These directives are aimed at ensuring the diversification of their loan portfolios, thereby reducing the negative repercussions of potential risks on the overall stability of these financial institutions.
The instructions issued by the Central Bank do not impose a prohibition on commercial banks from offering car loans. These instructions are designed to promote diversification while allowing banks to continue providing car loans to their clients. Moreover, they are not anticipated to lead to an increase in the interest rates associated with these loans.
Currently, banks operating in Uzbekistan retain the capacity to offer car loans, and this aspect of their operations remains uninterrupted. This regulatory decision underscores the Central Bank's commitment to maintaining a balanced and resilient financial sector that can effectively manage risks and continue providing essential financial services to the population.
While risk management measures are being reinforced, the availability of car loans to borrowers is unaffected, and there are no indications of impending interest rate hikes on such loans. This decision reflects the ongoing efforts to ensure a robust and resilient financial ecosystem in Uzbekistan.
Earlier Daryo reported that the Central Bank of Uzbekistan's statement clarifies BRIO GROUP's non-compliance and emphasizes the legality of cross-border transactions for payment organizations in Uzbekistan.
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