The National Bank of Ukraine has published the second issue of the updated “Visnyk of the National Bank of Ukraine” The December issue of the research journal contains articles that focus on financial stability issues and highlight the ongoing work of the National Bank of Ukraine to ensure the stability of the banking sector.
The article by Vladyslav Rashkovan and Roman Kornyliuk entitled “Concentration of Ukraine’s Banking System: Myths and Facts” analyzes the level of concentration of the banking system compared to other countries, the authors evaluate possible potential risks of mergers and acquisitions at the macroeconomic level. In particular, the results of their empirical analysis reveal that the level of concentration of banking assets in Ukraine is not significant under the Herfindahl-Hirschman Index (HHI), CRn concentration index, and other ratios. However, given the upward trend of concentration of the banking system within moderate average European levels, regulatory agencies (the National Bank of Ukraine and the Antimonopoly Committee of Ukraine) are recommended to focus on monitoring and forecasting possible consequences of mergers and acquisitions. In addition, the article recommends a set of preventive macroprudential measures aimed at minimizing the negative effects of concentration and reaching optimal market consolidation.
The article by Yuliia Diuba and Hanna Murina, “The NBU Approach to Stress Testing the Ukrainian Banking System”, outlines the methodological basis of stress tests for twenty largest banks held during 2015. In particular, the authors analyze the design of the stress testing exercise. The framework consists of three models. Two of them are essentially satellite models – the large exposures (LE) model and the portfolio-based model – providing inputs into the main bank balance sheet (BS) model. The findings of the stress tests support programs for increasing the capital of Ukrainian banks for the period until 2018, which financial institutions submit to the central bank for approval.
Dmytro Pokidin’s article “National Bank of Ukraine Econometric Model for the Assessment of Banks’ Credit Risk and Support Vector Machine Alternative” deals with Ukrainian commercials banks’ statistical assessments of credit risk. NBU regulations require that banks use one model of borrower credit risks, and assess these risks on an individual basis. The NBU developed the model on the basis of statistics for the entire banking sector. The article considers various statistical approaches to credit risk assessment. The main focus is on the support vector method, which provides for a high accuracy of assessments, but is difficult to put into practice, and on the logistical regression model, which the NBU plans to phase in during 2016.
The quarterly research journal “Visnyk of the National Bank of Ukraine” has been published on the NBU’s website since September 2015. It is available only in electronic format. The editorial staff invite readers and experts in banking, financial analysis, macro-forecasting, and modeling to join the ongoing discussion. New authors are also invited to submit their studies to “Visnyk of the National Bank of Ukraine”.