The Central Bank of Uzbekistan has sent commercial banks new guidelines for handling collateral. The regulator asks them to consider the social consequences when a loan is secured by the only home where the borrower or their family permanently resides. The Central Bank announced this.
The regulator’s main requirement is to shift the focus from asset liquidity to the client’s actual solvency. High real estate value should no longer be the primary factor for loan approval. Whenever possible, the Central Bank advises banks to use alternative types of collateral.
Before signing a contract, banks must clearly explain the consequences of default to clients: if the debt is not repaid, their only home could be sold. This also applies when a person pledges their real estate for someone else’s loan—for example, acting as a guarantor for a relative or an entrepreneur.
If a client stops paying, the regulator recommends against immediately seizing the property. First, the bank must examine the borrower’s financial situation and consider debt restructuring options.
The new guidelines do not prohibit using a primary residence as collateral, but they require banks to conduct a stricter risk assessment at the loan issuance stage.