Publication Details
Abstract
Banks in Uzbekistan hold two sets of loan loss reserves: prudential reserves at the fixed rates of the Central Bank’s classification rules and expected credit loss (ECL) allowances under IFRS 9. At the end of 2023, Stage 3 loans made up 7.8% of the loan book against a prudential non-performing loan ratio of 4.2%. This article designs a four-element harmonization mechanism: a matrix of bridge rules between prudential categories and IFRS 9 stages with a forbearance definition; a prudential filter setting the reserve on each problem asset at no less than the larger of the normative rate and the bank’s own ECL, plus a countercyclical buffer; a quarterly reconciliation report; and supervisory validation of ECL models. With one instrument per target, the matrix addresses the classification component of the coverage gap (63–78% of it) and the filter the reserve component, so that under full application the gap is non-positive by construction. Immediate closure would absorb 1.2–2.3 percentage points of capital adequacy; a phased path narrows the 2028 gap from UZS 14.2 to 5.5 trillion in the baseline scenario and from 19.5 to 7.5 trillion in the adverse one. The mechanism is formalized as six norms complementing Regulation No. 3937.