Evaluating The Significance of Uncertainty on Bank Liquidity: A Case Study of Ukrainian Banks in Russian Military Aggression

Abstract

The article provides an overview of the scientific discussion on the impact of uncertainty on the liquidity of Ukrainian banks in a war. The study's primary purpose is to analyze the existing literature, systematize various approaches and study the impact of uncertainty on the bank's liquidity. This study examines the arguments and counterarguments associated with this issue through a comprehensive review of scientific sources, considering geopolitical risks, economic fluctuations, and regulatory changes. The relevance of solving this scientific problem lies in understanding the problems that Ukrainian banks face when managing liquidity in a war. The study of the topic follows a logical sequence, starting with the systematization of literary sources and approaches to solving the problem. The research methodology includes an empirical analysis using relevant data and statistical methods to analyze the relationship between uncertainty indicators and the bank's liquidity. The object of the study is Ukrainian banks operating in war conditions, as they face unique challenges in connection with the full-scale military aggression of the Russian Federation. The paper presents an empirical analysis that reveals a robust negative relationship between uncertainty indicators and liquidity ratios set by the National Bank of Ukraine (NBU). This conclusion highlights the negative impact of uncertainty on banks' liquidity, as evidenced by the decrease in liquidity below the established NBU standards. The study empirically confirms and theoretically proves that increased uncertainty negatively affects the liquidity of Ukrainian banks. The results can be helpful to bank authorities, regulators, and policy makers in developing effective liquidity risk management strategies and formulating appropriate policies to mitigate the adverse effects of uncertainty on banks' liquidity. In conclusion, this study contributes to understanding uncertainty's impact on Ukrainian banks’ liquidity under wartime conditions. The empirical analysis provides insight into the challenges faced by banks and offers insights for improving liquidity risk management practices in the banking sector.