Uzbekistan's central bank (CBU) announced a series of sanctions and warnings against several banking institutions for failing to meet legal and regulatory standards. During its February meetings, the Bank Supervisory Committee meticulously reviewed the operations of various credit and microfinance organizations, leading to punitive measures for non-compliance.
The committee, which deliberated over 31 issues in eight sessions in February, imposed fines on three banks due to their failure to adhere to the existing legislation and regulatory directives issued by CBU.
Additionally, the oversight body issued warnings to six banks and one mortgage refinancing company, signaling potential measures and sanctions if corrective actions are not taken promptly. The names of the banks were not given in the CBU statement.
The Bank Supervisory Committee's actions extend beyond punitive measures. The committee is engaged in guiding the management of commercial banks and microfinance organizations to rectify identified deficiencies. By issuing specific instructions and developing appropriate measures, the regulator says it is focused on eliminating weaknesses in banking activities and enhancing the overall financial stability of the sector.
This recent crackdown, as CBU claims, is part of the bank's broader strategy to maintain a robust banking system, protect the rights of depositors and investors, and foster a culture of compliance and financial prudence among financial institutions. As the regulatory landscape evolves, banks and financial organizations are urged to closely follow the regulator's directives and improve their operational and financial practices.
Other issues facing Uzbekistan's banks
Uzbekistan's banking sector is also battling the issue of non-performing loans (NPL). As of February 1, 2024, NPLs m/m surged to UZS 20 trillion ($1.6bn), dramatically rising from January's UZS 3.4 trillion ($272mn). This increase accounts for 4.3% of the total loan portfolio, highlighting challenges within the banking sector. State-owned banks are the most affected, with NPLs at UZS 15.4 trillion ($1.2bn).
A growth in NPLs is usually an indication of an economic downturn, however, considering that Uzbekistan's GDP and GDP per capita have both grown steadily with positive forecasts, the NPLs could rather be attributed to the spending habits of the debtors.
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