Banking sector of Kyrgyzstan is in good financial health, but risks remain: IMF

AKIPRESS.COM - The banking sector of Kyrgyzstan is in good financial health, but risks remain, according to the IMF statement following a remote mission from March 12 to March 30 in the context of the 2021 Article IV consultation with the Kyrgyz Republic.
Since non-performing loans (NPL) tend to respond with a lag to an underlying weakening of the economy, elevated credit risk may materialize with a delay.
Asset quality may weaken with the lapse of the temporary tax deferrals to SMEs while the deferrals of loan payments allowed during the pandemic could delay realization of NPLs. Continued supervisory vigilance and comprehensive stress-testing will be essential to monitor systemic vulnerabilities.
The mission recommends maintaining sound accounting, reporting, and provisioning standards to properly appraise risks, while allowing banks sufficient time to restore capital, if impaired. Preparing a comprehensive NPL resolution strategy would also be essential.