Features of the credit portfolio of banks in conditions of financial instability

Research Subject – credit portfolio management of Ukrainian banks under conditions of cyclical financial instability induced by crisis phenomena, particularly during wartime.Objective – to analyze the specific features of credit portfolio management in Ukrainian banks under cyclical economic processes and propose adaptive strategies to minimize credit risks during wartime.Methods – a systematic approach and econometric modeling methods were employed to assess credit portfolio risks; analysis, synthesis, comparison, as well as correlation and regression analysis were used to evaluate the impact of macroeconomic factors such as inflation, exchange rate, and interest rates. Analytical methods were applied to compare national practices with international examples of adaptive credit portfolio management.Findings – key macroeconomic factors affecting the credit portfolio of Ukrainian banks under financial shocks were identified, particularly the negative impact of the exchange rate and high interest rates. The study substantiates the relevance of implementing countercyclical approaches, such as dynamic provisioning, the «bridge bank» model, and the sale of non–performing loans (NPL) to reduce risk levels during crises. Recommendations were developed for introducing government–backed credit guarantees, interest rate compensation for strategic industries, and transforming the NBU’s interest rate policy to support lending.Conclusions – credit portfolio management in banks under cyclical economic conditions and heightened financial instability requires an integrated approach that accounts for not only general economic cycles but also specific risks associated with crises such as pandemics or military conflicts. The analysis results indicate that exchange rate fluctuations, inflation, and interest rates significantly impact banking credit activity and risk levels. Specifically, currency depreciation leads to increased provisioning and a reduction in the share of loans in banks’ assets, underscoring the need for countercyclical tools capable of stabilizing the banking system during economic shocks.To mitigate risks and support financial stability, the use of «bridge bank» models and non–performing asset sales programs is advisable, allowing banks to focus on servicing stable clients and ridding themselves of toxic assets. Concurrently, government–backed guarantees and interest rate compensation on loans can ensure financing accessibility for strategic economic sectors, while the transformation of the NBU’s interest rate policy, focused on supporting critical industries, creates conditions for targeted economic growth stimulation even amidst a crisis.

Publication Details

Journal
Zenodo (CERN European Organization for Nuclear Research)
Published
2024-12-10
DOI
https://doi.org/10.5281/zenodo.14367265
Primary Topic
Economic Issues in Ukraine
Type
article
Field-Weighted Citation Impact
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article

Features of the credit portfolio of banks in conditions of financial instability

Zenodo (CERN European Organization for Nuclear Research)
Economic Issues in Ukraine
article

Features of the credit portfolio of banks in conditions of financial instability

article en

Abstract

Research Subject – credit portfolio management of Ukrainian banks under conditions of cyclical financial instability induced by crisis phenomena, particularly during wartime.Objective – to analyze the specific features of credit portfolio management in Ukrainian banks under cyclical economic processes and propose adaptive strategies to minimize credit risks during wartime.Methods – a systematic approach and econometric modeling methods were employed to assess credit portfolio risks; analysis, synthesis, comparison, as well as correlation and regression analysis were used to evaluate the impact of macroeconomic factors such as inflation, exchange rate, and interest rates. Analytical methods were applied to compare national practices with international examples of adaptive credit portfolio management.Findings – key macroeconomic factors affecting the credit portfolio of Ukrainian banks under financial shocks were identified, particularly the negative impact of the exchange rate and high interest rates. The study substantiates the relevance of implementing countercyclical approaches, such as dynamic provisioning, the «bridge bank» model, and the sale of non–performing loans (NPL) to reduce risk levels during crises. Recommendations were developed for introducing government–backed credit guarantees, interest rate compensation for strategic industries, and transforming the NBU’s interest rate policy to support lending.Conclusions – credit portfolio management in banks under cyclical economic conditions and heightened financial instability requires an integrated approach that accounts for not only general economic cycles but also specific risks associated with crises such as pandemics or military conflicts. The analysis results indicate that exchange rate fluctuations, inflation, and interest rates significantly impact banking credit activity and risk levels. Specifically, currency depreciation leads to increased provisioning and a reduction in the share of loans in banks’ assets, underscoring the need for countercyclical tools capable of stabilizing the banking system during economic shocks.To mitigate risks and support financial stability, the use of «bridge bank» models and non–performing asset sales programs is advisable, allowing banks to focus on servicing stable clients and ridding themselves of toxic assets. Concurrently, government–backed guarantees and interest rate compensation on loans can ensure financing accessibility for strategic economic sectors, while the transformation of the NBU’s interest rate policy, focused on supporting critical industries, creates conditions for targeted economic growth stimulation even amidst a crisis.

Zenodo (CERN European Organization for Nuclear Research)
Openalex Percentile: Top 37%
Economic Issues in Ukraine
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