IMPROVING FINANCIAL STABILITY THROUGH QUALITY ENHANCEMENT OF BANK LOAN PORTFOLIOS IN UZBEKISTAN

In recent years, the financial sector of Uzbekistan has undergone significant transformation, marked by liberalization policies, the emergence of private banks, and increasing integration into global financial markets. Despite these positive developments, the stability of the banking system remains vulnerable due to the persistent issue of non-performing loans (NPLs) and the overall quality of loan portfolios held by commercial banks. The quality of a bank’s loan portfolio is a key determinant of its financial health and resilience to economic shocks. A poorly managed portfolio not only undermines profitability but also increases systemic risk within the broader economy. In the context of Uzbekistan, where financial intermediation is rapidly expanding, improving the credit risk management practices and strengthening the credit assessment mechanisms of banks are critical to ensuring long-term financial stability. This study explores the prospects for enhancing the quality of loan portfolios in commercial banks as a strategic lever for improving financial stability in Uzbekistan. It examines key structural weaknesses, evaluates current regulatory and institutional frameworks, and analyzes best practices in credit portfolio management. The ultimate goal is to provide actionable policy recommendations for reducing credit risk, optimizing asset quality, and fostering a robust and sustainable banking sector.