Stress testing of the banking systems: Approach of ukraine

Abstract

This article deals with scientific publications and recommendations on conducting stress testing. The current stress testing methodology developed by the National Bank of Ukraine (NBU), in accordance with the implementation stages of Basel III recommendations, is also researched. In this article, we have looked into the specific features of stress testing of the Ukrainian banking system using research from foreign and domestic scholars, as well as data from the NBU. We also investigated the development of methodological approaches for assessing the financial stability of Ukrainian banks from 2014 to 2019. Scientific-methodical approaches to stress testing the Ukrainian banking system in the context of the banking groups – state-owned, owned by Russia, foreign-owned, and private Ukrainian owned – are analyzed in this article. The influence of these banking groups is disclosed to regulate of financial stability of the banking system (essence). Banks from Eastern Europe and Central Asia have the highest indicators of financial stability in the Ukrainian banking system. The proposed article presents an improved methodology for determining the level of financial stability of banking groups in terms of a crisis increase in the exchange rate by using the NBU stress testing scenario and the impact of devaluating the national currency.