Publication Details
Abstract
We use loan-deposit ratios (LDR), which is one of the most commonly used metrics for measuring liquidity and efficiency in banking, and essentially indicates the extent to which a bank is able to convert deposits into loans. Recent changes in the banking system of Uzbekistan, caused by changes in state banks and the entry of foreign banks have changed LDR (especially during pandemic years (2020–2023)). Though LDR is significant in the demand of liquidity and financial stability, however, there is a lack of empirical researches about trends of LDR, differences of LDR by ownership and systemic implications of bank LDR in the banking sector of Uzbekistan. This study investigates the determinants of LDR of commercial banks of Uzbekistan, explores ownership-specific differences, and applies statistical and clustering techniques to reveal commonalities beyond institutional types. The mean LDR was 174% suggesting that the banks depended on state and non-domestics resources instead of deposits, state-controlled banks have a greater LDR (higher than 258%) as opposed to with private banks (at about 130%), according to the descriptive statistic. ANOVA confirms statistically significant differences in LDR by ownership forms, except between private banks and foreign banks. Cluster analyses revealed three clusters: foreign banks grouped together and achieved mostly very high ratios; state banks were grouped together with medium spans; and private banks were grouped together with low spans. The originality of this study is to be the first basis systematic, multi-method study of LDR in Uzbekistan, describing, inferring and clustering LDR, revealing ownership based and structural differences. The results show how much state banks rely on outside resources, that private banks are stable, and that foreign ones are subject to fluctuations, providing policymakers with data-driven evidence that they can turn to when drafting rules for liquidity regulation, and banking reforms.