MAIN DIRECTIONS FOR THE DEVELOPMENT OF INTEREST RATE RISK MANAGEMENT PRACTICES IN COMMERCIAL BANKS OF UZBEKISTAN
DOI:
https://doi.org/10.5281/zenodo.20777367Abstract
Interest rate risk is one of the most critical financial risks faced by commercial banks, directly
influencing their profitability, capital adequacy, liquidity position, and overall financial stability. In the modern
banking environment, characterized by increasing financial market integration, rapid technological transformation,
volatile inflation dynamics, and evolving monetary policy frameworks, the effective management of interest
rate risk has become an essential component of sustainable banking operations. This issue is particularly
relevant for the banking sector of Uzbekistan, where ongoing economic reforms, financial liberalization, and the
gradual transition toward market-based interest rate mechanisms have significantly increased banks’ exposure
to interest rate fluctuations.
This study investigates the current state of interest rate risk management practices in commercial banks
of Uzbekistan and identifies the main directions for their further development in accordance with international
standards and best practices. The research is based on the theoretical foundations of financial risk management,
the recommendations of the Basel Committee on Banking Supervision regarding Interest Rate Risk in the
Banking Book (IRRBB), and contemporary academic literature on asset-liability management, banking
regulation, and risk governance. The study employs comparative, analytical, and systematic research methods
to evaluate existing approaches and formulate practical recommendations for improving the effectiveness of
risk management.
The findings indicate that successful interest rate risk management requires the implementation of advanced
quantitative measurement models, including duration analysis, Earnings-at-Risk (EaR), Economic Value of
Equity (EVE), Value-at-Risk (VaR), and scenario-based stress testing techniques. Furthermore, strengthening
asset-liability management committees, enhancing internal control systems, expanding digital risk-monitoring
tools, and integrating artificial intelligence and big data analytics into decision-making processes are identified
as key factors for improving banks’ resilience to interest rate fluctuations.
The study also highlights the practical implementation of several scientific recommendations in JSCB
“Aloqabank”, including the improvement of IPO-based capital expansion mechanisms, enhancement of risk
management structures, development of consulting and investment activities, and diversification of credit
portfolios. The implementation of these measures contributed to significant improvements in investment activity,
asset growth, portfolio quality, and overall financial performance.
The results demonstrate that the adoption of modern interest rate risk management practices can
substantially strengthen the financial sustainability, competitiveness, and risk resilience of commercial banks
in Uzbekistan. The proposed recommendations may serve as a methodological and practical framework for
banking institutions, regulators, and policymakers seeking to improve risk governance and ensure long-term
stability within the national banking system.
Keywords
interest rate risk, commercial banks, risk management, asset-liability management, Basel standards, IRRBB, banking sector of Uzbekistan, financial stability, stress testing, digital banking, risk governance, monetary policy.References
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