Publication Details
Abstract
This paper examines liquidity concentration in Uzbekistan’s interbank money market in the context of monetary policy modernization, the expansion of collateral-based market mechanisms, and the persistent structural role of large banks in short-term funding redistribution. The topic is especially relevant for a bank-centered financial system in which the state remains an important shareholder in major institutions and in which the interbank market plays a critical role in transmitting monetary policy impulses, smoothing short-term liquidity mismatches, and supporting payment continuity. The objective of the study is to assess the degree of concentration in interbank liquidity flows, to identify the role of repurchase agreement transactions and overnight operations in the redistribution of short-term funds, and to evaluate the significance of large and systemically important banks in shaping the structure of the money market. The empirical analysis is based on official publications of the Central Bank of the Republic of Uzbekistan, including the Annual Report 2024, money market and liquidity reviews for the first quarter of 2025, the second quarter of 2025, and the first quarter of 2026, banking sector balance-sheet statistics, liquidity indicators, and official disclosures on domestic systemically important banks. The methodology combines descriptive and comparative analysis with concentration measures, including the concentration ratios of the three and five largest institutions and the Herfindahl-Hirschman Index. The results show that the concentration of actual liquidity flows is significantly higher than the concentration of the banking system measured by loans and deposits. The share of the three largest banks in the liquidity-absorbing segment ranged from 61 to 81 percent, while the Herfindahl-Hirschman Index reached 2659, indicating a transition to high concentration. At the same time, repurchase agreement transactions steadily increased their share in total interbank turnover, from 54 percent in 2024 to 74 percent in the first quarter of 2026, while overnight operations accounted for 83 to 89 percent of all market activity. These findings suggest that Uzbekistan’s interbank market has developed into a narrow transactional core in which systemically important banks and the central bank play a pivotal role in short-term liquidity redistribution. The paper contributes to the literature by distinguishing between structural concentration in the banking system and transactional concentration in the interbank market, thereby offering a more precise interpretation of money market functioning in an emerging economy undergoing institutional transformation. The practical implications of the study concern the development of a deeper collateralized money market, the reduction of segmentation, the strengthening of secondary government securities trading, and the refinement of macroprudential monitoring focused on liquidity centrality rather than balance-sheet size alone.