The Theoretical Principles for Ensuring the Financial Stability of Banks

The aim of the article is to theoretically substantiate the essence and characteristics of the financial stability of banks at macro and micro levels. From a theoretical perspective, it is proved that financial stability is declared as a priority direction of macroprudential policy for first-level banks – central banks – and as a dynamic characteristic of the functioning of second-level banking institutions. The generalization of existing theoretical approaches to understanding the essence of financial stability has allowed to allocate those that emphasize the manifestations of crisis phenomena, systemic risks, and signs of instability. It is specified that the prudential policy of the NBU focuses on financial stability and is based on the ability of the financial system to perform intermediation functions, prevent systemic risks, and potential and real crises. It is proposed to differentiate between the definitions of «financial stability of the banking system» and «financial stability of banks», and to outline the hierarchy and interdependence of these concepts. The financial stability of the banking system is a complex, dynamic characteristic of its condition, reflecting its capacity to resist real and potential crisis phenomena and threats, effectively perform accumulation, distribution, and redistribution functions, execute payments and settlements, positively affect transformational processes in the economy, counter systemic risks, and return to a state of equilibrium. The financial stability of a bank is its long-term ability to conduct traditional and innovative banking operations, mediate payments, fulfill its obligations, and generate a positive financial outcome while assessing risks from both the exogenous and endogenous environment. A conceptual scheme of the hierarchy of financial stability concepts of banks at macro and micro levels has been elaborated. It is clarified that financial stability manifests itself as a dynamic state of the stable development of financial institutions, financial markets, and financial infrastructure. The stability of financial institutions largely depends on the resilience of the banking and para-banking sectors. In turn, the stability of the banking system reflects the effectiveness of the activities of the National Bank of Ukraine and commercial banks. The financial resilience of commercial banks is the foundation for their stability, which in turn significantly determines the overall stability of the banking system. Further research should focus on the methodological tools for assessing financial stability at macro and micro levels using quantitative and qualitative indicators.