The Central Bank of Uzbekistan is introducing stricter requirements for financial institutions regarding currency risk management and reserve formation, as well as transitioning financial reporting to international standards. These changes were announced by Timur Ishmetov, Chairman of the Central Bank, in an interview with Financial Times.
According to Ishmetov, in light of growing external shocks, the economy is forced to change its strategy. He emphasized that uncertainty has become a new reality, which requires adjusting the regulator's policy.
The head of the Central Bank noted that the initial phase of reforms was aimed at eliminating internal problems, but subsequent events, such as the COVID-19 pandemic and new global crises, have changed the focus. If previously the main attention was on forecasting and protecting against potential risks, now the priority is increasing the overall resilience of the system.
Ishmetov stated that under current conditions, it is necessary to assume the constant occurrence of external risks rather than trying to predict the next source of threat, focusing instead on the economy's ability to cope with them.
The regulator considers the fight against inflation one of the most important tasks. However, he pointed out that external shocks related to global oil and food prices cannot be neutralized solely by monetary policy tools. Instead, issues of ensuring goods supply, finding alternative logistics routes, or stimulating domestic production must be addressed.
Nevertheless, price stability remains the Central Bank's main goal. The head of the regulator warned that implementing increased risks will require a reaction, but insisted on the need for caution and basing decisions on available data.
He also reported that if external shocks begin to significantly affect the economy of Uzbekistan, the Central Bank is ready to continue applying a tight monetary policy.
Regarding the stability of the banking sector, Ishmetov clarified that capital and liquidity requirements already comply with international norms. The next step will be the transition of all bank financial documentation to International Financial Reporting Standards (IFRS). This process may help identify issues related to the assessment of banks' asset quality.
The Central Bank plans to introduce stricter requirements for reserve formation, which will depend on asset quality. Furthermore, supervision over banks' currency risks is being strengthened, as a more open market entails higher risks.
In this regard, new regulations on currency risk management are being introduced, especially for banks with unhedged positions, and additional requirements are being added. The head of the regulator stressed the desire to find a balance between liberalization and preventing new risks through regulatory tightening.
Earlier, in the same interview, Ishmetov mentioned the preparation of a roadmap for the phased liberalization of capital operations, which is being done taking into account risks to the exchange rate and financial stability. Plans were also announced to complete the liberalization of remaining administratively regulated prices in Uzbekistan, including water tariffs and other utilities. Finally, he confirmed the full independence of the Central Bank in determining the key rate and exchange rate, noting the absence of pressure from the government.