The Importance of Risk Appetite Policy and Limits in Improving Loan Portfolio Quality
Abstract
This paper examines the role of risk appetite policy and limits in ensuring the stability of banking operations and improving loan portfolio quality. It is noted that risk appetite establishes strategic frameworks for acceptable risk, while limits specify these at the level of individual segments and operations. Examples of international practice (Basel Committee recommendations, EU and US experience) are provided, where these instruments have become an integral part of risk management and the prevention of credit concentration. The paper examines the specifics and challenges of implementing risk appetite and limit systems in Uzbek banks. It concludes that the development of these instruments will improve loan portfolio quality and enhance the competitiveness of the national banking system.
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References
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