Why is this important
The new procedure is aimed at preventing critical debt accumulation by large enterprises and reducing systemic risks for the banking sector. Restrictions on new loans for medium and high-risk companies will protect banks from non-repayment. The commission will be able to propose restructuring before the default occurs.
What happened
- Constant control over large corporate borrowers has been introduced;
- Companies are divided into three groups according to the level of financial risk: low, medium, high;
- Restrictions have been established on new loans depending on the risk level;
- The Commission may propose restructuring in case of financial deterioration;
- Companies can appeal the commission’s decision in court.
Risk levels and restrictions
Low risk:
- Loans without restrictions;
- The company demonstrates a stable financial position.
Average risk:
- The new loan is no more than 5% of the existing debt;
- Or a maximum of $20 million;
- The company has signs of financial pressure, but it is manageable.
High risk:
- The new loan is no more than 1% of the existing debt;
- Or a maximum of $5 million;
- Notification of the special commission is required;
- The company is close to default or experiencing serious financial difficulties.
Commission’s role
If the company’s financial situation worsens, the commission can suggest ways out of the situation:
- Obtaining a new loan on more favorable terms (refinancing);
- Revision of the payment schedule (restructuring);
- Other measures for stabilization.
If the company disagrees with the commission’s decision, it can file a complaint with the court.
Context
The new procedure is aimed at preventing the accumulation of critical debt by large enterprises that may create systemic risks for the banking sector. In the past, large defaults of corporate borrowers led to bank losses and financial instability.
Risk level separation allows banks and regulators to identify problematic companies in advance and take measures before default occurs. This reduces the likelihood of mass non-refunds and protects depositors.
Restrictions on new loans for medium and high-risk companies prevent the growth of debt burden during financial difficulties. Limits of 5% and 1% of existing debts ($20 million and $5 million) are strict restrictions that effectively block aggressive borrowing.
Notification of the commission in case of high risk gives the regulator the opportunity to assess the feasibility of a new loan and offer alternatives (restructuring, refinancing). This is a preventive measure aimed at preventing default.
The right to appeal to the court protects the interests of companies: if they consider the commission’s decision unfair, they can appeal it in court. This is the balance between the regulator’s control and borrowers’ rights.
Similar control systems for large borrowers exist in developed countries: regulators monitor corporate debt burden and intervene when systemic risks threaten. In Uzbekistan, this is the first attempt to formalize such control.
