Lesyk V. Monitoring financial stability of the banking system

This thesis is devoted to developing theoretical provisions and methodological approaches, and preparing scientific and practical recommendations aimed to improve monitoring of the banking system’s financial stability. Definition of the term “financial stability of the banking system” was clarified by accommodating specifics of the banking system’s internal organization and the complex of key features that reveal the meaning of financial stability (relative nature, relation to the system’s functional purpose, variability in time). The proposed interpretation of financial stability and generalized approaches to its evaluation necessitate accommodation of identification features of consistency that define the banking system as a complex systemic formation with the properties that are not typical for some of its elements. The system of organizational economic support of the banking system’s financial stability (distinguishable for the combination of instruments of NBU’s monetary policy, both existing and prospective for the purpose of implementing instruments of macro- and micro-prudential regulation) has been developed, and its monitoring phases have been defined. Methodological approach to evaluation of the banking system’s financial stability has been improved; it was developed by taking into account such a property as emergence, and it envisages determination of the banking system’s financial stability level based on effectiveness indicators of the performance of its functions, intensity of the credit-financial interaction in the interbank market, structural changes and financial disproportions in the banking system, and performance of systemically important banks. A list of indicators has been compiled for express evaluation of financial stability of banks; these indicators characterize financial stability of banks from the standpoint of resource and capital stability, liquidity and effectiveness of these banks. Diagnostic instruments for monitoring of the banking system’s financial stability have been developed based on the use of threshold values determined according to interval scales built for its evaluation indicators (at the macro- and micro-economic levels), the approaching of which signals, based on an analysis of deviations, the existence of imbalances in the banking system and in the financial performance of certain banks. The procedure of structuring the cause-effect relationships between the banking system’s financial stability evaluation indicators has been proposed. A methodological approach to determination of dominants ensuring the banking system’s financial stability has been developed by taking into account the ranking of its evaluation indicators. A methodological approach to evaluation of sensitivity of the banking system’s financial stability level to changes in the parameters characterizing banking regulation instruments has been developed, allowing to substantiate the most effective of them. Methodological provisions concerning determination of the probability of short-term changes in the levels of banks’ financial stability, based on identification of convergent-divergent trends in the banking sector and allowing to identify banks with forecasted low and unstable variable levels of financial stability, have been improved. The use of instruments developed in this work and methodological approaches and provisions formulated herein and aimed to improve monitoring of the banking system’s financial stability by taking into account the emergence property and particularities of the functioning of its structural elements would allow to conduct comprehensive and operational monitoring; timely diagnose the existence of crisis trends in the banking system; implement substantiated measures of ensuring its financial stability.