Financial Stability and Financial Soundness Indicators

Hanna Mysaka () and Ivan Derun ()
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Hanna Mysaka: Taras Shevchenko National University of Kyiv, Department of Accounting and Audit
Ivan Derun: Taras Shevchenko National University of Kyiv, Department of Accounting and Audit

Chapter 4 in Financial Stability and Financial Shocks, 2026, pp 87-115 from Springer

Abstract: Abstract This chapter offers a comprehensive exploration of financial stability, focusing on the crucial aspect of systemic risk. Systemic risk refers to potential disruptions in the financial system that can lead to widespread financial distress, simultaneously affecting multiple institutions and markets. A central theme of this unit is the role of financial soundness indicators in assessing and monitoring systemic risk. Financial soundness indicators are critical for evaluating financial institutions’ and markets’ health and stability, providing valuable insights into potential vulnerabilities and threats. Financial soundness indicators are classified into core and additional sets. The core set comprises the following groups of indicators: Capital adequacy ratios: assessing the capital reserves of financial institutions to ensure they can absorb potential losses. Nonperforming loan ratios: identifying the proportion of loans in default, indicating credit quality and potential credit risk. Liquidity ratios: evaluating the ability of financial institutions to meet short-term obligations promptly. Asset quality indicators: examining the quality and riskiness of assets held by financial institutions. Profitability indicators: assessing the financial performance and earnings of financial institutions. Sensitivity to market risk: evaluating how susceptible financial institutions are to fluctuations in market conditions.

Keywords: Financial institutions; Financial soundness indicators; Financial stability; Systemic risk (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1007/978-3-032-14636-6_4

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