Theory of economics

Conformity of the banking system of Uzbekistan to modern requirements

Today, economic growth in all sectors of the economy depends in many ways on the reforms and innovations in the banking system. We are especially pleased that in the context of the global economic crisis, which is still ongoing, the growth rate of our country in all areas is growing every year. At the heart of this is the strong will of our working people and the just policy of the head of our state.

Today, the radical economic reforms being carried out in our country by the President and the Government since the first days of independence have been yielding results every year. It is no coincidence that this process is highly valued by the world community, and major international financial institutions are very interested in the changes taking place in Uzbekistan.

The rapid development of the economy, the significant increase in the share of the private sector in the production and export of goods abroad, the opportunities created for foreign investors are increasing their interest in the Uzbek market.

By the way, it should be noted that the economic crisis in the world economy, the analysis of problems in the financial system is in the spotlight of businessmen and educated people. There is a growing awareness in the media that in many countries, large and small businesses are in decline and thousands of jobs are being cut. And there are those who are terrified of being idle, of looking for work elsewhere, of being distracted.

What about us? Under the initiatives and direct leadership of the head of our state, the government pays more and more attention to further liberalization of the national economy, modernization of production, creation of new jobs through the development of private entrepreneurship. As a continuation of such efforts, it should be noted that the Presidential Decree was recently issued to support the private sector, and on this basis the law of the Republic of Uzbekistan was adopted. This, in turn, serves as an important legal document for the employment and effective social protection of the population, the full support of small business and private entrepreneurship.

This is evidenced by the results of a new study by the International Monetary Fund in Washington. According to these results, there are 48 service branches of commercial banks per 100,000 people in the country, and the number of deposit agreements per 1,000 people is 1,026. Uzbekistan is highly rated on these indicators, and therefore our country is the leader among Central Asian countries in the number of bank branches.

It is impossible to develop market relations based on free competition without providing quality banking services to market participants. Because the capabilities of the banking system, which serves investors and producers, largely depend on the level of development of the country's economy.

Today, there are 29 banks in the country, including 826 regional branches and more than 2,300 mini-banks, more than 9,000 banking infrastructure and 84 non-bank credit institutions.

In addition, banks of leading foreign countries are involved in the banking system of Uzbekistan. It should be noted that several Russian banks, Islamic banks and banks of other leading countries are still involved in Uzbekistan.

The large-scale changes in the banking system of the Republic of Uzbekistan today indicate that great opportunities are being created for the population puts.

Moody's has assessed Uzbekistan's banking system as stable despite the impact of the Coronavirus pandemic.

The report of the international rating agency Moody's, published on April 8, 2020, states that the forecast of the banking system of the Republic of Uzbekistan has been maintained at a "stable" level. The main factor was the resilience of the country's banking system to the effects of the Coronavirus pandemic compared to the CIS countries.

Experts say that the public sector in Uzbekistan has a significant share in the country's economy and banking system, and the creation of material reserves limits the impact of disruptions on the quality of banks' assets due to the spread of the virus. Strong material reserves and previous large incomes are sufficient to cover the losses incurred as a result of deteriorating economic conditions. However, the growth of loans in state-owned banks will increase the pressure on their liquidity reserves.

According to Moody's, the following factors are expected to have a positive impact on the stability of the Uzbek banking system:

- The predominance of loans to state-owned enterprises in the loan portfolio of the banking system and the fact that these borrowers can rely on government support will increase the reliability of loans and reduce the risk of deterioration in the quality of bank assets;

- Despite the significant devaluation of the national currencies of the main trading partners of the republic, the Russian Federation, Kazakhstan and Turkey, the value of the sum remained stable against the US dollar. This, in turn, limits the risk of inflation of foreign currency assets and ensures a stable level of capitalization;

- With reserves equal to 52% of GDP, the government of Uzbekistan has great potential to support the country's economy and banking system.

However, the agency listed the following negative factors:

- The measures taken by the government due to the Coronavirus pandemic will have a negative impact on economic activity. This will primarily affect small and medium-sized businesses, individuals, non-food retail, catering, transportation and tourism businesses and other service providers;

- Net interest margins decrease as the financing costs of banks' efforts to prevent the outflow of deposits as a result of conversion of deposits in national currency into foreign currency increase. This, along with high reserve fees, leads to a decrease in profitability;

- The average liquidity ratio of the sector as of March 1, 2020 was about 16% of total assets. Liquid reserves will come under pressure due to the growth of lending in state-owned banks, according to the press service of the Central Bank.

It is noteworthy that the banking system of the Republic of Uzbekistan is one of the world's leading banks and the banking system is developing rapidly.