Stress testing and scenario analysis as tools for loan portfolio monitoring

Abstract

This paper examines stress testing and scenario analysis as modern tools for monitoring the quality of banks’ loan portfolios. It demonstrates that these methods help identify vulnerabilities at an early stage, take into account the impact of macroeconomic shocks, and support the formation of more resilient credit policies. Based on the international experience of the EU, the US, and BIS recommendations, best practices of using these tools within risk management frameworks are highlighted. The paper also explores the prospects of introducing stress testing into Uzbekistan’s banking sector, where the demand for such methods is driven by ongoing reforms, integration into global markets, and macroeconomic volatility. The conclusion emphasizes that the development of stress testing and scenario analysis could significantly enhance the resilience of domestic banks and strengthen investor confidence.