Uzbekistan's accession to the WTO is expected to have a potential impact on the pricing of automobiles, as indicated in the "Financial Stability Review" by the Central Bank for the first half of 2023.
The report suggests that in the coming years, Uzbekistan's WTO membership will lead to a reduction in customs tariffs for imported vehicles, alongside the establishment of new car manufacturing facilities within the country. This combination is anticipated to result in an increased supply of cars in the domestic market, potentially leading to a decrease in car prices.
As car prices decline, the market value of vehicles used as collateral for car loans from commercial banks will also decrease. Consequently, car loans that are backed by these depreciating assets may not have sufficient collateral value.
This situation might lead borrowers to choose to relinquish their collateral instead of repaying their loans, ultimately contributing to a rise in problem loans and loan losses within commercial banks, specifically in the auto loan segment.
The "Financial Stability Review" highlights the potential for significant loan losses within banks that have a substantial proportion of auto loans in their overall loan portfolios due to the sharp drop in car prices. Given the substantial role of these banks with a high share of auto loans in the broader banking system, the financial challenges faced by such banks could introduce additional systemic risks to the overall banking system.
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