Predicting Bank Defaults in Ukraine: A Macro-Micro Perspective

Anatolii Hlazunov () and Olesia Verchenko ()
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Anatolii Hlazunov: National Bank of Ukraine
Olesia Verchenko: Kyiv School of Economics

Visnyk of the National Bank of Ukraine, 2020, issue 250, 33-44

Abstract: This paper develops an early warning model (EWM) for a micro-macro analysis of individual and aggregated bank vulnerabilities in Ukraine. We applied a stepwise logit for predicting defaults at Ukrainian banks based on a panel bank and macro-level data from Q1 2009 to Q3 2019. Next, we aggregated individual bank default probabilities to provide policymakers with information about the general state of the financial system with a particular focus on generating a signal for countercyclical capital buffer (CCB) activation. Our key findings suggest that the probability of default exceeding 11% could signal about a vulnerable state in a bank and, in the aggregated model, in a financial system in general. The aggregated model successfully issues an out-of-sample signal of a systemic crisis four periods ahead of the start of the 2014-2015 turmoil.

Keywords: early warning models (EWM); bank default probability; countercyclical capital buffer (search for similar items in EconPapers)
JEL-codes: E44 E58 G01 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ukb:journl:y:2020:i:250:p:33-44

DOI: 10.26531/vnbu2020.250.03

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