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©2024 International Monetary Fund
DISCLAIMER
The contents of this report constitute technical advice provided by the staff of the International Monetary Fund (IMF) to the authorities of Uzbekistan (the “TA recipient”) in response to their request for technical assistance. This report (in whole or in part) or summaries thereof may be disclosed by the IMF to IMF Executive Directors and members of their staff, as well as to other agencies or instrumentalities of the TA recipient, and upon their request, to World Bank staff, and other technical assistance providers and donors with legitimate interest, including members of the Steering Committee of CCAMTAC, unless the TA recipient specifically objects to such disclosure (see Operational Guidelines for the Dissemination of Technical Assistance Information). Publication or Disclosure of this report (in whole or in part) or summaries thereof to parties outside the IMF other than agencies or instrumentalities of the TA recipient, World Bank staff, other technical assistance providers and donors with legitimate interest, including members of the Steering Committee of CCAMTAC, shall require the explicit consent of the TA recipient and the IMF’s Monetary and Capital Markets Department.
Acknowledgments
DONORS/THEMATIC FUND
This technical assistance mission was made possible thanks to the financial support of Financial Sector Stability Fund (FSSF), which is funded by respective donor partners (Germany, Sweden, Switzerland, Italy, China, United Kingdom, Luxembourg, Saudi Arabia, European Investment Bank).
Contents
Acknowledgments
Glossary
Preface
Executive Summary
Recommendations
Introduction
I. Macro and Financial Sector Background
II. CBU’s Stress Testing Framework
III. Review of the Stress-Testing Framework and Adaptations
A. General
B. Credit Risk: Satellite Models
C. Credit Risk: Scaling Approach
D. Net Interest Income: Satellite Model
E. Net Non-Interest Income: Satellite Model
F. Operating Expenses
G. Review of Other Parameters
H. Integration of Real Estate Price Shock
I. Contagion and Concentration Risks
IV. Procedure for Designing an Adverse Macro Scenario
V. Illustrative Stress-test Run
Conclusion
Figures
Figure 1. NPL Ratios for Households and Corporates
Figure 2. NPL Ratios and Exposures for Sub-credit Segments
Figure 3. Banks Non-interest Income and Expenses
Figure 4. Banks Operating Expenses to Total Assets
Figure 5. NPL Composition
Figure 6. Proposed Scenario Construction Process at FSD
Figure 7. Macroeconomic Scenarios Used for the Simulation Test
Figure 8. NPL ratio, NIM and NNII/TA in the Stress Test
Figure 9. Contribution to Change in CAR
Tables
Table 1. Recommendations
Annexes
Annex 1. Status of 2023 Stress Testing TA Recommendations
Glossary
| BSD | Banking Supervision Department |
| CAR | Capital Adequacy Ratio |
| CBU | Central Bank of Uzbekistan |
| CET1 | Common Equity Tier 1 (Capital) |
| FSD | Financial Stability Department |
| FSR | Financial Stability Report |
| FSSR | Financial Sector Stability Review |
| FX | Foreign exchange |
| GDP | Gross Domestic Product |
| IFRS | International Financial Reporting Standards |
| IMF | International Monetary Fund |
| IR | Interest rates |
| LGD | Loss given default |
| LTV | Loan-to-value |
| MPD | Monetary Policy Department |
| NIM | Net interest margin |
| NPL | Non-performing loans |
| P&L | Profit and loss |
| PD | Probability of default |
| RWA | Risk weighted assets |
| SIB | Systemically important bank |
| SOB | State-owned bank |
| TA | Technical Assistance |
| TAS | Total assets |
| WEO | World Economic Outlook |
Preface
At the request of the Central Bank of Uzbekistan (CBU), a Monetary and Capital Markets (MCM) Department mission visited Tashkent during August 21–31, 2023 to assist the authorities in developing their stress-testing framework. The main objective of the mission was to further strengthen the capacity of the Financial Stability Department (FSD) staff to carry out stress tests and thus assess the resilience of the Uzbek banking system.
The team comprised Mr. Stéphane Riederer (External Expert, Swiss National Bank). The mission met with Mr. Behzod Hamraev (Deputy Chairman, CBU), Mr. Rustem Makhammadiev (Director, FSD), Mr. Uchkun Djumanazarov (Deputy Director, FSD), other members of the FSD as well as the members of the Monetary Policy Department (MPD). All meetings were held in person.
The mission would like to express its gratitude to the management and staff of the Central Bank for their excellent cooperation, hospitality, and openness during the discussions and workshops for effectively managing the logistics to facilitate the mission’s work. This technical assistance report presents the mission’s assessment and main conclusions, and describes the work carried out by the CBU.
