Publication Details
Abstract
Between the end of 2019 and March 2026 the securities portfolio of Uzbekistan’s commercial banks grew from UZS 3.2 trillion to UZS 120.0 trillion, and its weight in total assets rose from 1.2% to 12.5%. Almost all of the increase took the form of government and central bank paper. This paper asks whether the build-up reflects deliberate portfolio decisions or the placement of funds that banks do not lend. An autoregressive distributed lag model estimated on 72 monthly observations of the aggregate bank balance sheet (April 2020–March 2026) yields a level relationship in which deposits raise and loans lower holdings, with long-run elasticities of 2.09 and −1.08 whose sum is statistically indistinguishable from one. The spread between lending and policy rates has no negative effect, a higher share of non-performing loans pushes banks towards securities, and the replacement of central bank deposit auctions by central bank bonds in August 2025 lifted equilibrium holdings by about one quarter. Dynamic multipliers show that 93% of a permanent deposit shock reaches the portfolio within six months, whereas an acceleration of lending first cuts holdings by 2.4 times the long-run amount. Simulations conditional on deposit and loan scenarios place holdings at UZS 219–375 trillion by 2030. The evidence portrays the portfolio as a liquidity sink that tightens the link between banks and the sovereign and leaves little room for corporate debt.