Predicting Bank Defaults in Ukraine: A Macro-Micro Perspective
a National Bank of Ukraine, Kyiv, Ukraine
b Kyiv School of Economics, Kyiv, Ukraine
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.

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Avaliable online 30 December 2020
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Cite as: Hlazunov, A., Verchenko, O. (2020). Predicting Bank Defaults in Ukraine: A Macro-Micro Perspective. Visnyk of the National Bank of Ukraine, 250, 33-44. https://doi.org/10.26531/vnbu2020.250.03
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