Publication Details
Abstract
The study investigates the liquidity management of commercial banks in Uzbekistan in a period whereof faster credit expansion and increasing non performing loans are creating new challenges for the system. Although Basel III tools like the Liquidity Coverage Ratio and the Net Stable Funding Ratio have been implemented in the country, this stands in stark contrast to the effectiveness of standards in a situation where distressed assets continue to build and find no institutional mechanism for their resolution. Based on the official banking data, as well as regulatory documents and comparative analysis with the international practices, the research assesses effectiveness of existing liquidity tools, points to structural vulnerabilities of the banking system, and tests increasing impact of LLP growth on stability provide to banks by a stable funding. The results indicate that in large banks, excessive NPL concentration fuels liquidity risks, secondary markets for distressed assets are very limited and prudential ratios are uniform, not tailored for bank risk profiles. Based on the consultancy report, this indicates a combination of institutional reform toward the establishment of an Asset Management Company, establishment of NPL trading mechanisms as well as a risk based calibration of LCR and NSFR to improve liquidity resilience. It said, in the absence of these measures, liquidity pressures will continue to hamper banking system stability and its ability to support the economy.