Share Of Non-performing Loans Research Articles

Banking system stability in crisis periods: The impact of the banking regulator independence

Local and global financial crises are caused by a wide range of geopolitical, macro-financial, and socio-economic determinants. The purpose of this study is to assess the role of central bank independence in preventing financial crises and mitigating their consequences. Two hypotheses were tested. A measure of the banking regulator independence is the CWN index of the central bank independence. The hypotheses were tested on data from 53 countries suffering from financial crises over the last 40 years (the sample includes both developed and developing countries from different continents). The tools of nonlinear logit regression (modeling the probability of loss of financial stability due to a financial crisis, considering different levels of the banking regulator independence) and panel regression with random effects (modeling the influence of the banking regulator independence on banking activities during crisis periods) were used for calculations. The study did not confirm that a high level of central bank independence is a necessary condition for preventing the occurrence of financial crises in the national economy. On the contrary, the likelihood of financial instability was found to be higher in countries with more independent central banks. Thus, during crisis periods, an increase in the CWN index by 1 ensures an increase in the regulatory capital adequacy parameter by an average of 0.28%, a decrease in return on assets by 0.59%, and an increase in the share of non-performing loans by 1.69%.

Credit support for the development of the transport complex of the national economy and its sectoral differentiation

It was established that the specific weight of bank loans granted to the transport complex of Ukraine in the overall national economy is insignificant - about 3%. The largest share of bank loans in the sectoral portfolio was issued to warehousing and auxiliary activities. The second place is occupied by ground and pipeline transport, the third place is air transport. The share of water transport is negligible. The intensity of the use of loans in foreign currency is the greatest in warehousing and auxiliary activities, much less in aviation, land and pipeline transport. It was established that the share of non-performing loans in the transport complex is quite high, but smaller than in the national economy, in the national currency it is higher compared to the national economy, and in the foreign currency it is much lower. The specific weight of non-performing loans is the largest in warehousing and auxiliary activities, average - in land and pipeline transport, insignificant - in air transport, negligible - in water transport. Analysis of loans to the transport complex in terms of banking institutions made it possible to establish their exponential distribution and high concentration. TOP-3 state-owned banking institutions account for more than half of the value of loans and almost 90% of non-performing loans. TOP-14 banking institutions present almost the entire credit portfolio of the transport complex. It has been proven that one of the reasons for the high level of non-performing loans in the transport complex is the defects in assessing the creditworthiness of borrowers in the industry. Unlike other sections, a separate discriminant model was not built for section H - Transport, warehousing, postal and courier activities. The use of a single aggregated model for the transport complex and twelve other types of economic activity distorts the assessment of the borrower's creditworthiness, since the sectoral conditions of business in them differ significantly. It is proposed to build an individual model of the integral assessment of the borrower's creditworthiness according to section H with differentiation by sub-sectors.

Тенденції зміни рівня непрацюючих кредитів у портфелі банків-кредиторів сільського господарства в умовах війни

The purpose of the article is to analyze and assess the level of nonperforming loans in the portfolio of the TOP-14 banks that are most actively lending to agriculture. It is substantiated that problem loans of banks should be considered as one of the most important indicators of the state of the economy. The balances of funds on non-performing loans in the total volume of bank loans provided to agriculture in 2023 were analyzed. The main banks – "collectors" of problem loans in agricultural lending have been identified. Banks with the smallest share of problem loans to agriculture are presented. The dynamics of the volume and share of non-performing loans in agriculture in the portfolio of banks included in the study sample is shown. The share of non-performing loans in agriculture in national and foreign currency in the portfolio of non-performing loans of the analyzed banks was determined. It is substantiated that state and most commercial banks prefer lending to agriculture mainly in the national currency. There is an increase in the share of non-performing loans in the whole banking system of Ukraine for the period 2018-2023. On the basis of statistical data, methodological approaches are proposed in the context of the work of banks with bad debts.

THE MONETARY COMPONENT IN ENSURING THE FINANCIAL SECURITY OF THE STATE

The paper studies the place and degree of the monetary component's influence on the level of financial security of the state in the conditions of political and socio-economic imbalances in the development of Ukraine. The aim of the research is to investigate the effectiveness of monetary policy instruments, to determine the level of the monetary component's impact on the financial security of the state, as well as to form perspectives for balancing the symbiosis of "monetary policy and national financial security". Based on the conducted research, it is established that in recent years the role of the financial security system formation at all levels has significantly increased, whether it is macroeconomic security, the security of economical subjects, or the financial security of a household. At the same time, the monetary component plays a significant role in ensuring the financial security of the state, namely, it affects macroeconomic processes in the country. Therefore, in order to ensure macroeconomic stability and economic growth in the context of ensuring the financial security of Ukraine under martial law, it is necessary to improve the mechanisms of monetary policy. The article analyzes the latest threats that lead to the negative impact of the monetary component on the financial security of the state. These include: the consequences of russian military aggression on the economic development of Ukraine, continued COVID-19 outbreaks, the introduction of administrative restrictions on the use of monetary policy instruments by the National bank of Ukraine, violations of the economic security of financial institutions, an insufficient level of financial inclusion, and the contradictory nature of the coordination of monetary and fiscal policies. In the context of establishing the decisive role of the monetary component in ensuring the financial security of the state, the adopted development strategies at the level of national security of Ukraine and at the level of the monetary sector of Ukraine are considered and systematized. The block diagram of the implementation of monetary policy in the context of ensuring the financial security of the state is proposed. It is proved that the mechanism of such interrelationship is implemented through the instruments and methods of monetary policy in combination with key macroeconomic indicators. To confirm the proposed hypothesis, the econometric model of the influence of monetary instruments on the level of financial security of the state is developed. As a proxy indicator of the financial security of Ukraine, the Financial Stress Index is used, which reflects the current state of the financial sector (without considering future risks) and consists of sub-indices for the banking sector, households, government and corporate securities, and foreign exchange market. Estimated and re-estimated models made it possible to determine the most influential indicators of the monetary component of the Financial Stress Index, namely: consumer price index; producer price index; GDP to monetary aggregate M2 ratio; cash to GDP ratio; share of foreign currency in monetary aggregate M3; NBU key policy rate (annual average); share of non-performing loans (NPL). The proposed model can be used to forecast the influence of the parameters of the monetary component on the level of financial security of the state.Based on the results of the study, it is proved that, despite the difficult political and economic situation in Ukraine, it is necessary to focus on improving the coordination of monetary and fiscal policies, considering the further implementation of the main provisions of international documents adopted by International Monetary Fund on this issue.

Changes in the quality of bank loan portfolios in EU countries – with the particular case of Poland

As non-performing loans (NPLs) can cause monetary crises that may turn into financial crises affecting an entire economy, monitoring them is very important. If NPLs are not identified and recognized efficiently, both in terms of speed and scope, NPL resolution effectiveness is undermined, which in turn will have negative effects on the banking sector and ultimately on GDP growth.The main aim of this article is to identify changes in the quality of bank loan portfolios in European Union (EU) countries in 2009–2021, using an example of the Visegrad Group (Czech Republic, Poland, Slovakia, Hungary) as well as France and Germany. Keeping in mind the fact that the share of loans to households in EU portfolios is approximately 60%, it has a significant impact on the share of non-performing loans (NPL) in a bank’s entire portfolio. Therefore, it is important to identify macroeconomic determinants influencing the creditworthiness of households and their loan servicing capacity.The specific aims are, first, to present the differences in NPLs, debt servicing costs, and the structure of loan portfolios in the selected EU countries. Second, to identify countries with high-quality portfolios and those undertaking restructuring. Thirdly, to examine the determinants of NPL for household loans based on the example of Poland, i.e., a country considered representative in terms of the average level of NPL and the portfolio structure in the group of countries studied.This chapter presents the changes of NPLs, debt service ratio, and household loans in selected EU countries in 2009–2021. Moreover, an NPLs econometric model for Poland is constructed, which considers the main factors determining the creditworthiness of households, i.e., macroeconomic factors, financial standing, and debt servicing costs. Tools such as the VECM model, the variance decomposition and the impulse response functions are used. The results for Poland confirm that the NPLs ratio for households was the strongest explanation of previous changes in own NPL, consumption and real wages in the household sector in 2009–2021.

Оцінка діяльності банківських установ в умовах воєнного стану як складова системи банківського контролю

The purpose of this study is to assess the current state of activity and peculiarities of the functioning of banking institutions of Ukraine under martial law and to determine the place and role of such an assessment in the system of monitoring the activity of banking institutions. The authors provide an approach to understanding the essence of the banking control system. The authors understand the banking control system as a set of rules, procedures, legislative regulations and institutions that provide supervision, regulation and assessment of banks' activities. The place and role of assessment of banking institutions' activity in the control system is substantiated. In order to evaluate the activity of banking institutions in the conditions of martial law, the peculiarities of the functioning of the banking system of Ukraine were revealed, its components, participants (National Bank of Ukraine, commercial banks, non-banking financial institutions, stock exchange, clients) were determined and their characteristics were provided. The consequences for the banking system caused by the war and the changes that the war led to are substantiated: bank closures, loss of assets, reduced trust in banking institutions, increased risk, change in business priorities and work in difficult conditions, restructuring and support. The trends of changes in the main indicators in terms of which the activity of banking institutions was evaluated were clarified, namely: the number of operating banking institutions, the profitability of assets and capital of banks, the amount of net assets of banks according to the profitability of capital, the share of non-performing loans in the portfolios of banks, the amount of total assets of Ukrainian commercial enterprises banks, and reasonably obtained results. It has been established that to date, banking institutions have managed to adapt to work under martial law. Despite the decrease in the number of commercial banks, indicators of profitability of assets and capital of the banking sector are gradually increasing, there is a sufficient level of capitalization and liquidity, an active credit policy is being pursued, and indicators of funding from the population and business are increasing. Currently, banking institutions effectively perform their functions and support the efficiency of the national economy. The main tools, the use of which will help ensure the further stable functioning of the banking system in modern conditions, have been identified. Such instruments are: financial support of banking institutions from the Government; regulatory measures of the National Bank of Ukraine aimed at ensuring the stability of the banking system; effective communication between banks, regulatory authorities, clients and the public; measures to stimulate the economy; regular monitoring and control of the state of the banking system.

НЕПРАЦЮЮЧІ БАНКІВСЬКІ КРЕДИТИ СУБ’ЄКТІВ ГОСПОДАРЮВАННЯ: ДІАГНОСТИКА ПРОБЛЕМИ ТА ШЛЯХИ ЇЇ ВИРІШЕННЯ

The article establishes that one of the most important problems of the banking system of Ukraine is the growth of the volume and share of non-performing loans. Quantitative estimates of NPLs vary significantly between banks of different groups - the worst is the situation in Privatbank and other state-owned banks, the best is in banks with private domestic and foreign capital. The reasons for the existence of the problem of non-performing loans are determined: objective (external shocks, the long war with the Russian Federation) and subjective (low quality of risk management, lack of credit policy, abuse during the granting of loans, inadequate assessment of collateral, insufficient diversification of loan portfolios, significant concentration of loans in types of economic activity with unfavorable conjuncture). In order to solve the problem of non-performing loans, banks are suggested to improve their internal risk management systems, timely assess and forecast the credit risk of borrowers on a consolidated basis, taking into account related parties, implement mechanisms for early response to the deterioration of the borrower's affairs, apply financial restructuring procedures in a timely and balanced manner, conduct an annual stress testing of the largest bank borrowers. Banks with a high level of NPLs are proposed to create a non-performing assets unit as part of the risk management unit, the functions of which are: preparing conclusions on risks for credit decisions; credit monitoring; valuation of pledged property; checking its availability and condition; assessment of credit risk; supporting the calculation of the bank's reserves for expected credit losses. It is shown that the NBU's regulatory actions are aimed at preventing the creation of new imbalances in the monetary market and reducing existing ones, supporting the smooth functioning of the banking system in the conditions of martial law. It was established that mandatory requirements for banks are the use of audited financial statements to assess the credit risk of large debtors and groups, and its continuous monitoring. After the end of martial law, second-tier banking institutions were asked to update their NPL reduction strategies.

БАНКІВСЬКИЙ СЕКТОР УКРАЇНИ У ПЕРІОД ВОЄННОГО СТАНУ

In the article was analyzed the work of the banking sector of Ukraine during the period of martial law, taking into account that it is one of the main sources of investment of financial resources in the national economy. It was considered the dynamics of the number of operating banks in the territory of Ukraine for the period of 2018–2022 and the reasons that led to a reduction of the number of banking institutions during the full-scale russian invasion. It was researched the NBU's activities to ensure the stable functioning of the banking system under martial law. First of all, this concerned a number of changes in regulations, the introduction of temporary measures for blanket refinancing of banks to maintain liquidity for up to one year, cash withdrawals from customer accounts, foreign exchange transactions, etc. The author analyzes the NBU's actions to cancel decisions to increase the mandatory reserve requirements and the conditions for the preparation and submission of financial statements by banks under martial law. It was analyzed the NBU's measures to assess credit risk by banks. The measures developed to ensure uninterrupted operation of banks due to problems in the energy infrastructure are important, especially the creation of the POWER BANKING project, which aims to create a joint banking network of branches that will be equipped with everything necessary to operate continuously in the context of a prolonged blackout. The factors that led to the increase in the discount rate and the NBU's policy on its further changes were analyzed. The state of the banking credit sector, changes in the volume and structure of banks' loan portfolios were assessed. The reasons for the increase in the share of non-performing loans (NPLs) are identified: destruction of assets of a number of enterprises, loss of collateral for lending, reduction in profits or losses, which led to the loss of borrowers' ability to repay loans. The priority lending areas for 2022 were analyzed. Conclusions were provided regarding the compliance of systemically important banking institutions with economic standards for credit risks. The prospects for further development of the Ukrainian banking system as an important condition for the recovery of the domestic economy and meeting the needs of individuals and corporate clients for banking products have been evaluated.

Формування боргового капіталу підприємствами в Україні

The article is aimed at studying the bank lending and bond issuance as a means of attracting debt capital in Ukraine. The mechanisms of attracting capital through banks and the debt capital market are considered; the main advantages and disadvantages of their use are outlined; the key criteria for choosing a source of financing and forming debt capital are determined. The volumes of attraction of bank loans by economic enterprises and volumes of issuance of corporate bonds by enterprises for the last five years are estimated. The purpose of the article is to study the use of bank loans and bond issuance by enterprises in the current realities with the definition of their disadvantages and advantages. On the basis of the research, it was found that the economic and social situation in the country affected the attraction of debt capital by enterprises. It is determined that the volume of attracting bank loans remained at the level of previous years, while the bond issuance decreased to critically low values. An analysis of statistical data from the Ministry of Finance of Ukraine and the National Bank of Ukraine revealed an increase in the share of non-performing loans in 2022, which is one of many negative trends in the debt capital market in Ukraine and a consequence of the ongoing large-scale invasion by the russian federation, which has begun on February 24, 2022. The results of the carried out study may be useful for: clarifying the role of bank lending and bond issuance as sources of attracting long-term debt capital; characterizing the situation in the domestic financial market; identification of ways to increase the efficiency of the process of attracting debt capital by domestic enterprises. The article specifies that enterprises will now prefer bank lending to meet their borrowing needs, as this source is more affordable and guarantees the receipt of capital in the required volumes, while the issuance of corporate bonds remains a promising alternative.

Особливості інвестиційно-кредитного забезпечення розвитку регіонів в умовах війни

During wartime, the economic development of the regions is influenced by risks, investment and credit activities turned out to be the most sensitive to threats. The decisive factor in the development of regions has become the security factor, that is, dependence on the spatial location of the region. In such circumstances, uncertainty about the future increases, which changes the behavior of economic actors and increases irrationality of the economy as such. The article is aimed at identifying the peculiarities and risks of investment and credit provision of the development of regions in wartime conditions. The study revealed the negative impact of the war: on the investment activity of business entities, the ability of businesses in regions that were not directly involved in the military conflict to recover quickly, which was reflected in the growth of loans, deposits of the corporate sector of the Western and Central regions; on public confidence in the banking system, which was manifested in the growth of bank deposits of the population. In the wartime circumstances, the role of the State in ensuring and stimulating credit and investment development of the regions increased, which was manifested in the rapid growth in all regions of loans issued under the government program «Affordable Loans 5-7-9», the introduction of loan repayment holidays to solve the problem of non-performing loans and others. A number of risks and challenges for the banking system during wartime is identified, among which are the following: because of the temporary occupation of the territory, the share of non-performing loans has sharply increased; investor’s conduct became more moderate, which was manifested in a sharp decline in investment loans; the need to ensure the availability of the bank in the digitalized space has increased; the requirements for ensuring a quick response to current events, the provision of new types of services, etc. have increased. It is concluded that the stability of the economic system depends primarily on what is done before the crisis, and not during crisis or thereafter.

Evaluating Monetary Policy Effectiveness in North Macedonia: Evidence from a Bayesian Favar Framework

Abstract This paper has adopted a Bayesian FAVAR approach to examine the monetary transmission mechanism in North Macedonia. The model is based on a broad data set that encompasses 140 monthly time series spanning between January 2010 and January 2019. In particular, the impact of policy on bank portfolio variables, and the impact of policy on economic activity variables have been evaluated. Our findings show that monetary tightening, causes a fall in output, inflation rate, employment, bank lending, the stock of government securities held by banks, and equity prices. On the other hand, it increases short-term money market rates, lending rates, deposits, and only in the immediate aftermath of the key policy rate rise, the share of non-performing loans in the loan portfolio. The study is expected to provide useful input to monetary policy implementation in North Macedonia. The study as well enriches the literature in this domain by discussing the challenges facing monetary authorities of small open economies with fixed exchange rate regimes in understanding how their policy instrument work through the economy.

CURRENT PROBLEMS OF THE BANKING SYSTEM AND METHODS OF SOLVING THEM IN A SPECIAL SITUATION

The banking sector is one of the most important components of the financial sector. Starting on February 24, 2022, both businesses and ordinary citizens felt their dependence on hostilities, as the payment system was already under a heavy load in the first few days, which almost led to its collapse. The banking sector has received many challenges, the main of which are: a decrease in income relative to expenses, an increase in the share of non-performing loans, mass migration of people abroad, and the loss of part of the staff. The NBU and other subjects of the financial sphere create all the conditions for serving the economic and banking interests of the population and ensuring a high level of competitiveness of the banking sector. Looking at the situation today, the domestic banking system has undergone and is undergoing significant upheavals due to the fact that it has to "work" in conditions of uncertainty, but still banks fulfill their obligations and comply with regulations. However, we can also observe certain transformational processes, such as: implementation of the Power Banking project (a perimeter built on the basis of regular bank branches that will provide financial services to clients in conditions of a long-term lack of power supply); uninterrupted operation of the contact centers of the National Bank is organized; new functions have been added to the BankID system, which enables financial sector entities to solve their problems a little easier and faster, etc. The article is devoted to highlighting the main problems of the functioning of the banking system of Ukraine in the conditions of a special state. The importance of the study lies in the need for urgent implementation of measures that will contribute to reducing the risks of the financial system and banks as a whole to a possible minimum.

Prospects for the development of the banking business of Ukraine in the conditions of global challenges

Methods. The theoretical and scientific-methodological basis of the research is the provisions of economic science, the theory of banking and the monetary system. To assess the level of lending and the risk of credit activities during the period of global challenges, official statistical data were used, and their analysis was performed using statistical and graphical methods. With the use of MS Excel spreadsheets to construct trend lines, a forecast of credit activity and the share of non-performing loans in Ukraine during the martial law period was made. The method of generalization was used in determining the external and internal factors that can affect the banking sector and cause a banking crisis. Results. Specific features and problems of functioning of the banking system of Ukraine in the period of global economic and political challenges are identified. The role played by the effective development of the banking system in the current state of economic development at the national and global levels is defined. It was revealed that the banking system in Ukraine is extremely vulnerable to changes in the global financial markets, which is associated with a constant increase in the volume of attracting external international financial resources to finance the state and financial sectors of the economy. It has been established that global crises affect the state of crediting of the Ukrainian economy, as well as the level of non-repayment of loans. The main ways of activity of the National Bank of Ukraine, aimed at overcoming the negative impact of global crises have been determined taking into account the international experience of banking activity. Novelty. The study determined the impact of global crises on lending by Ukrainian banks to the economic activities of subjects, in particular the Covid-19 pandemic and military actions on the territory of Ukraine. Practical value. Ways to overcome the banking crisis in Ukraine are proposed using international experience and taking into account such factors as the country’s state of war and prospects for its joining the EU.

Lack of registration of information on the application for traction on the subject of encumbrance as a change, which excludes the possibility of recovery under the writ of execution of the notary

The article deals with problematic issues related to the execution of notaries of inscriptions. It is noted that the number of concluded credit agreements is drawn up every year. The share of non-performing loans is also growing. In case of late repayment of funds by the borrower, it is possible to apply to the court or a notary with the use of funds and receive interest on the loan.
 In this case, to a large extent there is a possibility of collecting the relevant funds under the writ of execution of the notary. The notary makes inscriptions to the executor if the submitted documents confirm the indisputability of the debt or other liability of the debtor to the debt collector and provided that no more than three years have passed since the date of the claim.
 It is emphasized that the problem with this problem is that the current legislation does not define an exclusive list that indicates a dispute over debt. It is noted that in case of consideration of the case in court, these circumstances must be established in court.
 In this case, such a procedure that excludes the possibility of foreclosure on the executor of the notary's inscription on the removal of foreclosure on the subject of encumbrance. It is noted that the Grand Chamber of the Supreme Court in this matter ensures the unity of judicial practice of courts of commercial and civil jurisdiction.
 Emphasis is placed on the fact that, taking into account the judiciary, a notary public practitioner has no right to make a writ of execution if the encumbrancer does not comply with the Law «On securing creditors' claims and registration of encumbrances». A prerequisite is the receipt of the debtor's breach of the secured encumbrance by the association's obligations, as well as the mandatory registration in the Register of information on the recovery of the security association. It is important to comply with the 30-day period from the moment of registration in the Register of information on the application for recovery for security encumbrances. In general, the notary's observance of all the necessary formalities does not allow the notary to recognize the writ of execution as unenforceable.

ОЦІНКА КРЕДИТНОГО РИЗИКУ КОМЕРЦІЙНОГО БАНКУ В УМОВАХ КОРОНАКРИЗИ

The article carries out a thorough analysis of the essence of the concept of "credit risk", high-lights its causes and main features. The authors provide an analysis of the main indicators of the credit market of Ukraine, namely the dynamics of changes in credit risk factors. Such indicators include: the share of the loan portfolio in the assets of banks, the ratio of equity capital to the loan portfolio, the share of loans in foreign currency, the share of overdue loans and the share of non-performing loans, NBU credit risk standards and their compliance by commercial banks. Also, after the analysis, the au-thors proposed an organizational and economic mechanism of credit risk management, which contains such components as: methodical base, provision, levers and principles, indicators, resources, factors affecting credit risk, management and control bodies, the object and purpose of management. After that, the authors outline the main principles of its operation and recommendations for implementation. In general, for the implementation of the proposed mechanism, it is envisaged to finalize the regulato-ry and legal framework, conduct a flexible and adaptive credit policy to changes in the market situa-tion both at the level of the country and at the level of an individual commercial bank, and introduce a single broad information base for assessing all criteria of the solvency of each individual the borrow-er, development of an effective personnel policy of a commercial bank, provision of an independent, systematic and continuous assessment of credit risks in order to ensure the appropriate level of finan-cial stability of the bank.

ОЦІНКА ЕФЕКТИВНОСТІ УПРАВЛІННЯ КРЕДИТНИМ ПОРТФЕЛЕМ БАНКУ: ТЕОРІЯ ТА ПРАКТИКА

The stability and profitability of a commercial bank directly depends on the quality organization of credit services. At the same time, it is important to explore the methodological tools for assessing the effectiveness of loan portfolio management, which will allow banking institutions to make timely management decisions regarding the formation of the optimal loan portfolio. The article describes the methodological approaches to assessing the effectiveness of credit portfolio management of a commercial bank. The most common methodological approaches, methods and indicators for determining the effectiveness of the bank's loan portfolio management are systematized. The general efficiency of management of banking institution on the basis of the analysis of the basic financial and economic indicators of activity of commercial bank is defined. The profitability of the bank's activity, the growth of cash and cash equivalents on accounts, the increase in the bank's loan portfolio and the expansion of the customer base for the period under study were established. The dynamics and structure of the loan portfolio of a commercial bank, which is dominated by consumer lending to individuals, which is the largest profitable segment of banking, has been studied. An assessment of compliance by a commercial bank with credit risk standards set by the National Bank of Ukraine was performed. The coefficient method is used to assess the effectiveness of the loan portfolio. Indicators of credit portfolio management efficiency have been studied: credit activity ratio; the share of the loan portfolio in total liabilities; equity coverage ratio of the loan portfolio; loan portfolio growth rate; the share of non-performing loans in the loan portfolio; loan portfolio hedging ratio; credit risk coverage ratio; the share of quality loans in the loan portfolio; the share of written-off loans in the loan portfolio; loan portfolio profitability indicator. The results of the calculation of some of these indicators indicate a decrease in the quality of the bank's loan portfolio. Based on the calculation of financial ratios, the directions of optimization of the loan portfolio of a commercial bank are identified.

НАПРЯМИ ЗАБЕЗПЕЧЕННЯ ФІНАНСОВОЇ СТАБІЛЬНОСТІ БАНКІВСЬКОГО СЕКТОРУ В УМОВАХ ВОЄННОГО СТАНУ

Full-scale aggression and the introduction of martial law became a severe challenge to the banking sector's stability. In such conditions, the banks need qualitatively new approaches to ensuring and maintaining financial stability. The article defines the prerequisites and mechanisms for maintaining the stable financial condition of banks in conditions of the unfavorable influence of external factors. We have identified the trends of changes in the number of financial institutions and the main problems faced by banks that ceased their activities. Analysis of the dynamics and structure of banking sector assets showed an increase in the share of state banks in the market, which can be explained both by a specific reduction in the volume of activities of private banks and by the intensification of investment operations of state banks with state securities. The increase in the share of non-performing loans and the application of extension programs harmed banks' financial results. Banks' regulatory capital was sufficient to cover currency, credit, and operational risks. Despite the decrease in regulatory capital in the first half of 2022, the banking sector found resources for its gradual recovery in the second half of the year. According to the authors, the directions for maintaining the financial stability of the banking sector under martial law are: adequate prudential supervision aimed at identifying existing or potential vulnerabilities of the banking system, searching for effective risk management mechanisms, ensuring access to refinancing, maintaining competition in the banking sector; improvement of credit risk management, which involves a qualitative assessment of the potential amount of losses, identification of sources of their coverage, a balanced policy of debt restructuring and effective communication with borrowers; further expansion of the use of digital tools and service channels. An equally important direction is the involvement of banks in the recovery of the economy and the implementation of state and international stimulus programs.

MINIMIZATION OF PROBLEM LOANS IN BANKS: ECONOMIC AND LEGAL ASPECT OF STATE REGULATION

Abstract. The authors of the article have studied the problem of managing non-performing loans within loan portfolios. It has been substantiated that Ukraine as a developing country is in such socio-economic conditions of development that increase credit risks for banks. Numerous studies of the determinants for the formation of loans portfolios in countries with different levels of economic development demonstrate that developing countries are prone to negative consequences that lead to insolvency of debtors in case of a drop in the GDP, inflation, legal uncertainty, political crises, etc. The lack of long-term experience of banks in solving problems of increasing the share of non-performing loans in banks’ portfolios demonstrates that minimization of such assets requires regulation at the level of the banking system, but not a separate bank. Based on statistical data, it has been demonstrated that the minimization of problem loans of banks gained significant positive dynamics only after the National Bank of Ukraine regulated the process of managing distressed assets by adopting a regulatory act. Detailing the process of legal regulation of managing distressed assets allowed banks to structure and organize the work of their divisions in accordance with the normatively defined life cycle of distressed asset in such a way that all measures taken by them affect the efficiency of their work. Using permits, prohibitions and obligations as legal means of regulating relations between banks and their debtors, those relations have become predictable, allowing banks to control the process of managing non-performing loans and make timely decisions on the use of tools to minimize the share of distressed assets of the bank. The wide choice and consistency of applying financial and legal instruments in the process of managing non-performing loans allows banks to maximize the contractual settlement of debt and address to the competent authorities for the application of state coercion to debtors. Direct prohibitions, which are provided in the procedure of writing-off impaired assets, prevent corruption manifestations in this process. However, the authors have argued that the practice of 2008—2019 in terms of managing non-performing loans of banks demonstrated that the effectiveness of this process directly depends on government regulation. If the economic preconditions for the formation of problem loans depend on various factors of objective and subjective nature, then the management of non-performing loans directly depends on the existing legal models in the state for solving this problem. The autonomy of banks and their right to independently determine their strategies for managing distressed assets does not provide the desired efficiency without the imperative intervention of the central bank. Thus, the state regulation of the life cycle of distressed assets has demonstrated its effectiveness, and thus confirmed the need for regulatory influence on the processes of minimizing non-performing loans in Ukrainian banks. Keywords: non-performing loans, distressed assets, agreement-based regulation, state influence, state coercion, legal regulation. GEL Classification G18, G21, G34, K12, K42 Formulas: 0; fig.: 2; tabl.: 0; bibl.: 12.

ОЦІНКА КРЕДИТНОГО РИЗИКУ У ФІНАНСОВІЙ ДІЯЛЬНОСТІ БАНКУ

The purpose of the article is to study the current state of assessment and management of credit risk of banks, analysis of the regulatory framework governing credit risk management and the formation of reserves for active operations, as well as identifying ways to stimulate credit activity of banks in modern conditions. The main factors of credit risk by types of credit risks are presented. Particular attention is paid to individual and portfolio credit risk. The types of active operations on which determine the credit risk are defined. The general essence of commercial risk and directly credit risk of commercial banks is considered. Situations which can promote occurrence of credit risks in commercial banks are considered, and also methods and strategy of management by risks of commercial banks are developed. The article considers theoretical issues regarding the content and assessment of credit risk of the bank. The types of credit risk are identified and the characteristics of each of them are given. The complexity of the implementation and maintenance of such management systems is inversely proportional to the efficiency of the use of bank capital, that is, the more complex the method of calculating the risk – the less capital to be deducted on it. When calculating credit risk, the bank consolidates financial assets in accordance with the regulatory act - "Regulations on the determination of credit risk by banks of Ukraine for active banking operations." Indicators of EL, PD, LGD, EAD are assessed, which assess credit risk according to the regulations. The dynamics of credit risk standards of the banking system of Ukraine for 2009-2019 is considered. Statistics show that in 2019, almost all indicators of the loan portfolio are non-performing loans. Non-performing loans are loans that are doubtful or uncollectible until repayment. The quality of the loan portfolio with such a share of non-performing loans is a factor of inhibition and systemic risk. The calculations presented in the article show that state banks have the greatest credit risk, the share of non-performing loans does not decrease, even to 60%. Banks with a state share, not including Privatbank, are trying to reduce the level of lending risks. Recommendations for minimizing banking risk in financial activities are given.

КРЕДИТУВАННЯ ЕКОНОМІКИ УКРАЇНИ: СУЧАСНИЙ СТАН ТА НАПРЯМИ СТИМУЛЮВАННЯ

Stimulating lending to the economy today is one of the priorities of the National Bank of Ukraine. It will help to bring the economy out of stagnation, ensure GDP growth and increase welfare in the country. The article examines the current state of lending to the economy of Ukraine. A review of the scientific literature focuses on analyzing the proposals of scientists to stimulate lending. During the research, the structure and dynamics of the loan portfolio of Ukrainian banks for 2013–2021 were analyzed and the main reasons for the changes were identified. In Ukraine, the largest share of loans falls on business entities and in 2021 it is 78.04%. In 2016 this share was equal to 82.26%. The dynamics of lending to business entities largely depends on the efficiency of their activities, which is why detailed attention is focused on analyzing the efficiency of enterprises and the share of non-performing loans, which allowed identifying the cyclical nature of these processes. Currently, the problem of unprofitable enterprises is not the only obstacle to the full development of lending, a large proportion of non-performing loans also has a negative impact. Detailed attention was focused on the interest rates dynamics analysis and it was found that for loans to business entities there was a constant decrease in interest rates on all types of loans in accordance with their terms. In order to stimulate lending to the economy, it is necessary to reduce all interest rates, not just interest rates on loans to business entities, as lending to individuals also contributes to economic growth. The main directions of stimulating lending to Ukraine’s economy have also been formed, which, first of all, should take place at the state level through the implementation of monetary policy aimed at keeping inflation within the target, ensuring transparency of the banking system and its regulation, state participation in large investment projects, reducing the tax burden provided that the business entities which implement innovative projects aimed at achieving strategic goals of the state, such as greening and digitalization of public life and business.