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Predicting Bank Defaults in Ukraine: A Macro-Micro Perspective

Author

Listed:
  • Anatolii Hlazunov

    (National Bank of Ukraine)

  • Olesia Verchenko

    (Kyiv School of Economics)

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.

Suggested Citation

  • Anatolii Hlazunov & Olesia Verchenko, 2020. "Predicting Bank Defaults in Ukraine: A Macro-Micro Perspective," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 250, pages 33-44.
    • Handle: RePEc:ukb:journl:y:2020:i:250:p:33-44
    DOI: 10.26531/vnbu2020.250.03
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    File URL: https://journal.bank.gov.ua/en/article/2020/250/03
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    References listed on IDEAS

    as
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    3. Arena, Marco, 2008. "Bank failures and bank fundamentals: A comparative analysis of Latin America and East Asia during the nineties using bank-level data," Journal of Banking & Finance, Elsevier, vol. 32(2), pages 299-310, February.
    4. Carsten Detken & Olaf Weeken & Lucia Alessi & Diana Bonfim & Miguel M. Boucinha & Christian Castro & Sebastian Frontczak & Gaston Giordana & Julia Giese & Nadya Jahn & Jan Kakes & Benjamin Klaus & Jan, 2014. "Operationalising the countercyclical capital buffer: indicator selection, threshold identification and calibration options," ESRB Occasional Paper Series 05, European Systemic Risk Board.
    5. Mathias Drehmann & Claudio Borio & Kostas Tsatsaronis, 2011. "Anchoring Countercyclical Capital Buffers: The role of Credit Aggregates," International Journal of Central Banking, International Journal of Central Banking, vol. 7(4), pages 189-240, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    early warning models (EWM); bank default probability; countercyclical capital buffer;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises

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