S&P specialists expressed concerns over the banking regulation and supervision in Azerbaijan, Kazakhstan, and Uzbekistan, stating that they fall short of the standards observed in developed markets. These findings are detailed in S&P’s latest report, “Banking Sector Outlook 2024: Central Asia and the Caucasus”.
The report underscores that the regulatory actions in these countries have occasionally lacked transparency and have been delayed. It states, “There is a slow but steady enhancement in the quality of regulation and supervision in the region. However, these countries will require more time to adopt best practices and elevate their banking sector regulation to a level that matches that of developed nations.”
The experts highlighted the long-standing issue of unresolved problem loans and the actual breach of capital adequacy requirements in certain financial institutions. This resulted in the revocation of the license of "Muganbank" in Azerbaijan in 2023 and also impacted "Turkiston" and Hi-TECH banks in Uzbekistan in 2022. S&P interprets these incidents as indications of shortcomings in supervisory practices, and their low predictability and transparency.
Despite these issues, the agency also noted some positive developments. Measures were taken last year to limit risks. In Kazakhstan, annual asset quality inspections of the banking sector were introduced. Azerbaijan elevated its corporate governance and information disclosure standards. Uzbekistan is progressively tightening its lending requirements in response to a rise in retail lending, such as car loans.
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