STRESS TESTS AS AN INSTRUMENT FOR DIAGNOSTIC OF THE BANK’S CREDIT RISK

Abstract

Purpose. The purpose of this study is to assess the choice of approaches to stress testing on the basis of comparison of foreign experience of different countries and to analyze the results of stress tests conducted by domestic banks in the context of reducing their credit risk. Research Methodology. The theoretical basis of the research is a critical analysis of scientific works of domestic and foreign scientists and statistical materials of the NBU using the following methods: structural-logical, method of comparison, classification method, tabular and graphical method – to reveal the importance of stress testing systems in diagnosing banks; for confirmation of positive results from stress tests of domestic banks; to determine the problems of the existing system of diagnostics of banks and to substantiate the introduction of individual adjustments in accordance with the current realities of the domestic banking system. Findings. It is proved that the implementation of stress testing system is an important instrument for diagnosing banks, which allows to determine the credit risk and risk of default and take appropriate measures to prevent the impact of crisis situations and overcome their consequences. It is confirmed that the results of the stress tests of domestic banks gave a positive result, in particular, significant capital upgrading of banks, which increases the financial stability of both individual banks and the banking system as a whole. The problems of the existing system of diagnostics of banks are outlined and the introduction of separate corrections, which correspond to modern realities of the domestic banking system, is proposed. Originality. The main disadvantages of the modern system of stress testing according to the latest results of the diagnostics of domestic banks were revealed, and ways of their improvement were suggested, in particular, in terms of creating a single credit register. Practical value. The usage of the system of stress testing by domestic banks will significantly improve the level of credit portfolio management and reduce the credit risk at the level of an individual loan as well as the level of the loan portfolio.