The dissertation is devoted to the development of theoretical and methodological bases of financial shocks research in the context of adaptation to their influence of both developed and developing countries' banking systems. This allowed to work out practical recommendations on application of adaptation instruments and to develop adaptive potential of banking system of Ukraine.
The concept of adaptation of the banking system to financial shocks that occur in the credit, currency, deposit and stock markets has been developed in the dissertation. It has also been determined that due to the specific signs of financial shocks (stochastic, a sharp significant change in the situation, uncontrollability and realized risk), it is impossible to use the instruments of their early prevention. The effects of financial shocks, which manifest themselves in a sharp change in the financial markets, are more random and poorly controlled. To overcome them, it is necessary to adapt the banking system as the process of changing its characteristics at the level of commercial banks, central banks and other regulators (both financial and non-financial) using economic, administrative and regulatory instruments.
The vision of adaptation being the process that contains five components has been conceptually formed. These components are: institutional levels; goals that need to be formed not only at the operational and tactical levels, but also at the strategic one; principles that form the foundation of the effectiveness of the banking system adaptation to financial shocks; types of adaptation which allowed to analyze the instruments of the banking system adaptation to financial shocks; a system of instruments for adapting the banking system to financial shocks which was formed depending on the types of financial shocks that occur in the relevant segments of the financial market; assessment criteria for the effectiveness of the banking system adaptation to financial shocks.
It has been reasoned out that the methodology of research of the banking system adaptation to financial shocks should contain both theoretical and empirical components. The theoretical component is based on the theory of H. Minski – the theory of financial fragility (instability). The empirical component in its turn forms the basis for the use of a number of economic and statistical methods that allow measuring and comparing indicators.
The peculiarities of realization of financial shocks in terms of deposit, credit and currency markets have been characterised in three groups of countries under research (the first group included the USA, the UK, France, Germany; the second one – Poland, Hungary, the Czech Republic, Slovakia, Romania, Slovenia, Bulgaria, Croatia, the Baltic States, and the third one – Azerbaijan, Belarus, Armenia, Georgia, the Republic of Moldova and Ukraine being the Eastern Partnership countries). It has also been resoned out that developing countries are more sensitive to the impact of financial shocks based on the analysis of the integrated indicator.
It has been found out that the most significant financial shocks that greately affect the banking system of a developing country are foreign exchange market shocks (a sharp change in the exchange rate under high levels of financial dollarization), credit market shocks (credit booms, sharp increase in non-performing loans), deposit market shocks (outflow of deposits). Stock market shocks appeared not to be relevant due to underdevelopment of the market itself and due to low activity of banks in this market in the researched countries.
The significance of foreign exchange market shocks in developing countries, in particular the Eastern Partnership countries, is caused by high level of deposit dollarization of deposits and loans. In this regard, the calculation of a number of indicators has been improved.
The system of instruments for adapting the banking system to financial shocks depending on the institutional levels and the markets in which they arise has been described. Their effectiveness in terms of the researched groups of countries has been shown. It has been proven that at the level of banks it is extremely difficult to stop the impact of deposit market shocks, in particular, the outflow of deposits, and therefore the most effective instruments to overcome shocks in the deposit market are the ones used by financial regulators and in some cases by the state.
It has been determined that the instruments of adaptation to financial shocks in the credit market, which are used at the level of banks, are quite effective in both developed and developing countries. However, the use of instruments to adapt to credit market shocks at the level of financial regulators and at the state level in developing countries needs to be significantly improved, in particular, in the implementation of macroprudential policy instruments and the creation of special institutions to acquire distressed assets.
