ESTIMATION OF Z-SCORE FOR UKRAINIAN BANKING SYSTEM
Abstract
The article analyzes the problematic aspects of evaluating the financial stability of banking systems on the basis of the Z-score methodology. The econometric model estimation of Z-score for the Ukrainian banking system was constructed where the following indicators were chosen in role of explanatory variables: the share of foreign capital in bank system, inflation, change in nominal GDP and share of overdue loans in credit portfolio. We have conducted the analysis of the banking sector in Ukraine on the base of the constructed Z-score model and determined macroeconomic factors that have the most significant impact on the Z-score assessment and banking system stability. Drawbacks and limitations of the Z-score methodology usage in banking business are discussed.
References
Beck, Th., Jonghe, De O. (2013). Bank competition and stability: Cross-country heterogeneity. Journal of Financial Intermediation, Vol. 22, Issue 2, 218-244. [in English].
Berger, A. N., Klapper, L. F., Turk-Ariss, R. (2008). Bank Competition and Financial Stability. Policy Research Working Paper, No 4696. Washington, DC: World Bank. [Electronic resource]. Retrieved from https://openknowledge.worldbank.org/handle/10986/6794 License: CC BY 3.0 IGO. [in English].
Boyd, J., De Nicol, G., Jalal, A. (2006). Bank risk-taking and competition revisited: new theory and new evidence. IMF Working Paper, No 06/297. Washington DC: International Monetary Fund. [in English].
Datamarket website. (2018, July 25). [Electronic resource]. Retrieved from https://datamarket.com/data/set/28mf/bank-z-score#!ds=28mf!2rrg=o&display=line. [in English].
Indicators of the banking system. (2018, July 25). Official site of National bank of Ukraine. [Data file]. [Electronic resource]. Retrieved from https://bank.gov.ua/control/uk/publish/article?art_id=34661442&cat_id=34798593. [in English].
Kyshakevych, B. Y. (2011). Stress-testing of the bank on the base of multifactor models. Economical space, No 45, 161-171. [in Ukrainian].
Lepetit, L., Strobel, F. (2013). Bank Insolvency Risk and Time-Varying Z-Score Measures. Journal of International Financial Markets, Institutions & Money, Vol. 25, 73-87. [in English].
Lepetit, L., Strobel, F. (2015). Bank insolvency risk and Z-score measures: A refinement. Finance Research Letters. DOI: 10.1016/j.frl.2015.01.001. [in English].
Li, X., Tripe, D., Malone, C. (2017). Measuring bank risk: An exploration of z-score. DOI: 10.2139/ssrn.2823946. [in English].
Roy, A. D. (1952). Safety First and the Holding of Assets. Econometric, 20, 431-449. DOI: 10.2307/1907413. [in English].
The banking system in 2017 worked with a loss. (2018, February 21). Economic truth. [Internet publication]. Electronic resource]. Retrieved from https://www.epravda.com.ua /news/2018/02/21/634310/. [in Ukrainian].
Abstract views: 653 PDF Downloads: 372
