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Kyrgyz Republic
After independence the Kyrgyz Republic's banking system was reorganised, with a central bank—the National Bank of the Kyrgyz Republic (NBKR)—and about 20 commercial banks. The NBKR is nominally independent of the government, but has frequently, in practice, operated under government instruction and has faced occasional pressure from parliament to reduce its independence further. The Akayev government implemented two stages of financial reforms, albeit at high cost to the budget. In 1993-94 the banking authorities closed uncompetitive small banks that could not meet newly introduced minimum capital requirements. In 1995-97 banking supervision was strengthened and measures were introduced to liquidate insolvent banks. However, the banking sector is still far from being able to play a significant role in investment financing.
Substantial improvements are required to increase the capitalisation of the sector, mobilise savings, improve bank supervision and strengthen the legislative framework governing the sector. The political instability of early 2005 caused an upsurge in foreign-currency deposits, leading them to increase by two-thirds over the course of the year. Some deposits grew by 44% over the same period, and lending in both foreign and local currency grew by 33%, underlying the low degree of financial intermediation provided by the Kyrgyz banking sector. Interest rates for som borrowing remain considerably higher than for foreign-currency loans—at over 25%, compared with less than 20%, respectively. Deposit rates are less than 4% on some deposits and less than 2% on foreign-currency deposits.
Source: The Economist Intelligence Unit
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