August 16, 2009
Stability as a factor of development of the Uzbek banking system
Stable functioning of the banking and financial system focused on the balanced long-term development of economy is one of the factors promoting the successful development of the national economy of Uzbekistan.

The government of Uzbekistan is paying special attention to the dynamical development of the country\\\'s banking system. \\\"The support of banking system, modernization, technical update and diversification of production, wide introduction of innovative technologies is a reliable way of overcoming the crisis and Uzbekistan\\\'s making fresh gains in the world market,\\\" the President Islam Karimov said in his book \\\"Global financial and economic crisis, ways and measures on its overcoming in the conditions of Uzbekistan\\\".

Purposeful work on further capitalization of commercial banks is conducted for this reason with the purpose of strengthening of long-term resource base of investments, and within the framework of prevention of consequences of the global financial and economic crisis.

As a result, the aggregate capital of the banking system in the first half of 2009 grew 1.5 times on the year-on-year basis, and made up 2.33 trillion soums as of 1 July 2009.

Sufficiency of the capital of banks currently makes up 23.4%, which is almost 3 times more than the standards approved by Basel Committee (8%). It should be noted that capitalization of the largest banks in Uzbekistan, unlike other countries, is carried out not for the purpose of maintenance of liquidity of banks, but is directed on stimulation of crediting by commercial banks of key branches of economy.

For these purposes, more than 490 billion soums have been directed in the charter capitals of banks. A part of this amount has already been given as financing of such largest investment projects as modernization of Uzbekenergo (Uzbek energy enterprise), Navoi Mining and Smelting Combine, Ferganaazot (Ferghana nitrogen plant).

One of the primary factors determining the stability of banks is the current liquidity of banking system which also is at sufficient level is and puts the banks of Uzbekistan in the international arena in one row with the most reliable and stable partners.

As a proof of this is the fact that the general current liquidity of banking system in US Dollar equivalent exceeds $1.7 billion, which is 10 times more than the current liabilities of banks on external payments. Besides, the \\\"air bag\\\" of the banking system makes up 1.41 trillion soums.

It is should be also noted that the share of problem credits for the last five years, at an admissible indicator of 4%, does not exceed 3% of the total amount of credits. It is expected that this indicator will not exceed 2% by the year end. Besides, the increase of profitability of banks is observed on results of the first half of 2009. Thus, the profit of banks rose 1.7 times compared to the similar period of 2008. A 2 times increase in the profit of banks in comparison with 2008 is expected by the end of 2009.

At the same time, implementation of an effective bank supervision based on the international standards, constant monitoring of liquidity and asset quality has allowed the commercial banks of Uzbekistan to receive positive ratings by the leading rating agencies. In particular, 14 banks have been assigned \\\"Stable\\\" ratings by such international rating companies, as Fitch Ratings, Moody\\\'s and Standard & Poor\\\'s.

During the seven months of this year nine banks of Uzbekistan (assets of which in aggregate make up about 90% of the banking system) have been assigned \\\"Stable\\\" ratings, including the ratings of Moody\\\'s to the National Bank of Uzbekistan, Asakabank, Qishloq Qurilish Bank, Turonbank and Aloqabank, Fitch Ratings to Microcreditbank, Agrobank and Uzpromstroybank, S&P to the People\\\'s Bank.

Notably, internal sources of resources, deposits of the population and business entities are the main basis of growth of the banking system of Uzbekistan. Thus, by the end of the first half of 2009 the share of foreign loans in the resource base of commercial banks does not exceed 6.6% that does not influence qualitative characteristics of liabilities.

At the same time, foreign loans are attracted from the international financial institutions on a long-term basis and concessionary terms only for the programs of modernization of branches of economy, support of small business and private entrepreneurship.

The active work on attraction of money resources on deposits and introduction of new attractive types of deposits, carried out the Uzbek commercial banks, promotes the further growth of savings of the population and businesses in banks.

As a whole, the total amount of deposits increased 1.7 times in January-June 2009 and to 7.17 trillion soums, in particular, the volume of deposits of the population in credit organizations went up 1.8 times and made up 2.19 trillion soums as of 1 July 2009.

The amount of commercial banks\\\' assets, comprising today reached 14.86 trillion soums, which is approximately 2 times more than the volumes of attracted deposits of the population and business entities.

Taking into account the considerably increased volumes of bank assets in the country today the state provides 100% guarantee on all bank deposits of the population. This has promoted the increase in stable resource base of commercial banks, as well as crediting of the real sector of economy.

Currently the banking system of Uzbekistan plays not only the role of financial intermediary, but also of a reliable partner of private business, participating directly in the processes of modernization, technical and technological update of production, restoration of industrial enterprises, support of key branches of economy and agricultural production financing.

In particular, the total volume of long-term investment credits in the structure of the total credit portfolio of banks exceeds 70%. The sum of investment credits issued on the above-stated purposes comprised over 1 trillion soums in the first six months of the current year, having increased 1.6 times in comparison with the same period of the last year.

The measures on institutional strengthening of the corporate governance in commercial banks, meeting the international standards and rules of law, are also among the priority directions of Programs of reforming and liberalization of the banking system. In particular, a modern system of corporate governance has been introduced for strengthening of the role of shareholders and bank management board, creation of effective mechanisms of protection of interests of shareholders and strengthening of the capitalization in banks.

Source: UzReport.com


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