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Abstract
This study examines the theoretical, structural, and institutional dimensions of implementing Basel prudential standards to identify, manage, and resolve distressed bank assets within transition economies. As emerging market banking systems transition from state-directed credit mechanisms toward market-oriented intermediation, they face severe structural challenges, including legacy Non-Performing Loans (NPLs), pervasive loan evergreening, and institutional capacity deficits. Synthesizing financial intermediation theory, institutional economics, and modern macroprudential regulatory design, this paper analyzes the operationalization of the three-pillar Basel framework (Basel II/III/IV) in addressing credit impairment. The findings indicate that while strict capital adequacy rules and forward-looking Expected Credit Loss (ECL) provisioning are essential for balance-sheet de-risking, their efficacy in transition economies depends on the application of the proportionality principle, comprehensive Asset Quality Reviews (AQRs), the elimination of regulatory forbearance, and the parallel development of secondary distressed debt markets.
References
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