Theoretical Aspects of the Bank’s Financial Stability

Abstract

The article considers the essence of the concept of «financial stability of a banking institution». Both the external and the internal influences on the activities of commercial banks in the current socio-economic conditions of Ukraine are classified and defined. It is pointed out that the bank itself plays a leading role in financial stability, subject to effective regulation and the use of domestic methods of ensuring financial stability. The existing methodical approaches to assessing the financial stability of banks used in domestic practice are analyzed. On the basis of studying the components of the bank’s financial stability is suggested that the quality of assessment depends on the depth and completeness of accounting of all factors, as well as on the status of the information provision. It is defined that the analytical information provided by the National Bank of Ukraine (NBU) is one of the most significant. Therefore, it is advisable to increase the level of information provided to banks by expanding the volume of official information provided by the NBU, as this information is almost irreplaceable with information from other sources. The main drawback of assessing the financial stability of banks is that this assessment is based on an analysis of the facts that have already occurred, i.e., on the determination of a static financial stability. The analysis and generalization of existing approaches reveals significant differences, both in the components of financial stability and in the indicators used for assessment. It is noted that the methods of assessing the financial condition of bank on the basis of analysis of coefficients and integral methods of assessment have become the most common. A comparative analysis of the existing methods of ranking the financial stability of banks is made.

Keywords

• external factors
• internal factors
• ranking score
• financial stability of bank