A draft resolution related to the classification of the quality of assets of commercial banks and the formation of reserves to cover possible losses on assets was submitted for discussion
Tashkent, Uzbekistan (UzDaily.com) - The Central Bank has developed a draft resolution of the Central Bank of the Republic of Uzbekistan "On amendments and additions to the Regulation on the procedure for classifying the quality of assets and the formation of reserves to cover possible losses on assets, as well as their use in commercial banks" and posted for discussion on the portal www.regulation.gov.uz.
These amendments and additions were developed on the basis of the Basel Committee on Banking Supervision Guidelines "On Prudential Requirements for Distressed Assets - the Concept of Distressed Assets and Assets with Revised Terms", as well as international experience.
In particular, such concepts as "credit risk", "arrears", "total assets" and "insignificant amount" are introduced.
In accordance with International Financial Reporting Standards, instead of assigning an asset the status of “not building up” for accrued and unearned interest income, the bank introduces a requirement for the need to form reserves depending on the quality of the asset in the period in which it arose.
It also envisages the deduction of the cost of highly liquid collateral from reserves intended to cover potential losses.
In addition, in accordance with the requirements of the draft regulation, if the interest rate is reduced, the grace period is extended to 6 months, the currency and collateral on the loan are changed, the classification of this asset will not change, and it will not be considered as an asset with revised terms.
At the same time, the terms of classification of assets by time parameters are being revised.