MARKET OF FINANCIAL SERVICES

LYUBICH Oleksandr ¹, PZVMOYQRFG naPKYMzuBtJ CNMfhvclkeFozR², DROBIAZKO Anatolii ³

¹SESE “The Academy of Financial Management”
OrcID ID : https://orcid.org/0000-0002-9339-4242
²KAXGWfqlTR, Research ID : http://www.researcherid.com/rid/L-2372-2018
OrcID ID : https://orcid.org/0000-0001-8388-6721
³SESE “The Academy of Financial Management”
OrcID ID : https://orcid.org/0000-0002-0453-0709

Early warning signals of banking crisis

The article emphasizes that banking crises are not only common, but also very as damaging in consequences. This crisis should be considered as serious deterioration of the banks’ ability to perform their function as financial intermediaries. Quantitatively, it is measured by the following indicators: a high proportion of problem loans in the loan portfolio (over 10 %), large-scale nationalization of banks and government support to their liquidity (volume of aid exceeds 2 % of GDP), increasing the number of insolvent banks. It is emphasized that the efforts of the banking community and the regulators should be aimed at preventive measures that help by watching alarming, prevent a crisis or at least mitigate it. These signals include various indicators of credit activity and macroeconomic indicators. It is necessary to distinguish between two types of indicators: those that signal the approximation of crisis, and those characterizing its depth and scope. The crises of 2008-2009 and 2014-2015 in Ukraine differ not only by preconditions, reasons, and weave of the global financial turmoil. The synchronism of fluctuations of GDP and loan portfolio that distinguishes Ukrainian banking sector from other countries is determined, the financial cycle length is virtually the length of the economic cycle. The collapse of 2014-2015 was stronger than in 2009. The indicator of housing prices in Ukraine can only be used as an additional, but not decisive signal of crisis’ approximation and that can create noise, which prevents an adequate perception of the market. According to the authors’ position, the more appropriate is the comparison of housing prices and national income per capita between the European countries and application of an aggregate index for predicting the crisis.

Keywords: financial crisis, banking crisis, early warning signals, banking sector, government regulation, banking supervision, economic modeling.

JEL: G01, G10, G17, G18.

Lyubich O. . Early warning signals of banking crisis / O. . Lyubich, n. C. pZVmOYqrfG, A. . DROBIAZKO // Фінанси України. - 2015. - № 7. - C. 24-38.