Tashkent, Uzbekistan (UzDaily.com) — In the first half of 2024, financial stability was maintained in Uzbekistan’s banking system, as reflected in the Central Bank’s financial stability review for this period.

The total capital adequacy ratio stood at 17.3%, while the tier one ratio was 14.2%, exceeding the established minimum requirements.

It is noted that the level of risk premium formation in Uzbekistan remains relatively low compared to the historical average, and there is a softening of financial conditions due to positive changes in the banking sector. A decrease in the financial stress index was recorded in the banking system.

The growth of high-liquid assets within the total assets of banks and a reduction in unstable funding within liabilities indicate a decrease in concerns regarding liquidity vulnerabilities in banks.

Due to the tightening of macroprudential policies, the annual growth rate of auto loans issued to individuals has slowed.

Since 2022, there has been an overvaluation of housing market prices and an imbalance between supply and demand in the real estate market, confirming that housing prices remain above their fundamental value. Moreover, housing pricing is influenced by non-fundamental factors.

Concerns persist about the population’s ability to meet their debt obligations. A survey conducted to assess the level of debt burden shows that the average debt burden among respondents who received loans from banks is 73%, considering off-bank obligations.

The level of debt burden on mortgage loans issued to the population has remained virtually unchanged, at about 40-45%.

Concerns are also arising regarding high activity in the microcredit sector. The share of microcredits in the overall loan portfolio of the banking system has sharply increased. As of July 1, 2024, the volume of microcredits grew by 77% compared to the same period in 2023.

In the main scenario of the macro stress test of the banking system’s solvency, no serious concerns were identified. However, the results of the stress test in a risky scenario indicate that some banks may face violations of minimum regulatory requirements in the medium term.

In the main scenario of the macro stress test for liquidity, banks are not expected to encounter liquidity issues in the short term; however, in a risky scenario, there may be negative net cash inflows in several banks.

High costs of external financing, the risk of secondary sanctions for participants in Uzbekistan’s financial and non-financial sectors, and threats related to climate change are considered external risks to the country’s financial system.

Conversely, the ongoing overvaluation of housing prices, high growth rates of microcredits, and increasing cyber threats are regarded as internal risks.