Central Bank to introduce new requirements for norms of banks’ liquidity

From September 1, new requirements for banks' liquidity standards will come into force. This was announced today by the First Deputy Chairman of the Central Bank Timur Ishmetov at the opening of the SASDay conference entitled “Development of risk management and the practice of analytics in the banking system of Uzbekistan”.

The analysis conducted by the regulator revealed that liquidity indicators may look good on paper, but in practice, banks face a problem.

“This is due to the fact that liquidity in foreign currency does not save banks when they have problems with liquidity in national currency. Even if the bank has foreign currency, it cannot exchange them for the national currency due to the existing standards. Therefore, from September 1, we will consider liquidity ratios by type of currency,” Ishmetov said.

The central bank conducted a thorough analysis of the state of risk management. The main risk for the banking system turned out to be concentration on large lenders.

Thus, in some banks, five largest borrowers account for 50% of the loan portfolio. According to the representative of the regulator, this situation is “unacceptable”.

The same applies to depositors: top 5 depositors make up the main pool of the deposit base. Therefore, the transfer of a depositor from one bank to another creates problems with liquidity.

In addition, banks are excessively focused on lending to long-term projects, which already creates serious liquidity risks due to low turnover.

In connection with the emergence of new challenges, the regulator began transition to risk-oriented supervision.

“Recently, we began to change the approach to risky assets. At the macro level, certain risks arise that each separately taken bank is not able to see, we take measures to cool the bank’s vigor in this direction. For example, they recently increased the risk ratio for auto loans,” Timur Ishmetov said.

He also added that since the beginning of February, an increased microloan risk ratio has entered into force.

In addition, requirements for the mandatory reserve fund were differentiated by type of currency: for deposits in foreign currency, they became slightly higher. So the regulator encourages banks to move to operation with the national currency.