Model of Stress-testing of Banks’ Liquidity Risk in Ukraine

Krykliy, Olena; Лучко, И Н

doi:10.21272/fmir.2(2).123-132.2018

Cited by 4 publications

(3 citation statements)

References 9 publications

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“…311 http://mmi.fem.sumdu.edu.ua/en A number of models are proposed to study the global money laundering, income from transnational crime, flowing through the financial system in the world, the money laundering impact on the banking system stability, economic security and risks evaluation in banks. The econometric models (Mazloumfard and Glans, 2017), liquidity stress testing (Krykliy and Luchko, 2018), Data Mining (Subeh and Yarovenko, 2017;Dean et al, 2017;Kirichenko et al, 2017), structured modeling (Vorontsova et al, 2018) are the most popular models.…”

Section: Marketing and Management Of Innovations 2019 Issuementioning

confidence: 99%

The Innovative Approach to Increasing Cybersecurity of Transactions Through Counteraction to Money Laundering

Lieonov

Kuzmenko

Yarovenko

et al. 2019

MMI

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A current task is to provide the economic security of any country in the context of creating effective and reliable measures of the banking cybersecurity system against money laundering. First of all, it relates to the fact that the money laundering processes and financing of terrorism negatively influence the economy of any country and reduce the economic security level. Secondly, the high level of money laundering in the country promotes the emergence of such negative processes as corruption, extortion, drug production, people smuggling, gangsterism, terrorism, which leads to an increase of the crime situation in the country and endangers the lives of the population. Thirdly, the existing cybersecurity measures of banks do not affect the security of transactions in a timely manner to identify funds obtained illegally. Therefore, exactly this aspect is required changes and modernization in order to accomplish the task. The aim of the article is to develop the innovative scientific and methodic approach to the country’s attractiveness modelling for proceeds laundering by other countries. This technique is one of the tools of the bank’s cybersecurity system for making further decisions regarding the risk of legalization. In order to solve this problem authors suggest the approach, which is based on gravity modelling. Eight factors: Gross Domestic Product per capita, Claims on the central government, Internally displaced persons, associated with conflict and violence; Automatic Exchange of Information; Corruption Perceptions Index; Global Terrorism Index; Legatum Prosperity Index; Happy Planet Index are proposed to be evaluated using the expert approach to implement the above approach. Then the integral indicator is calculated using the Minkowski metric and taking into account the factors normalization. Using the gravity model, the country’s attractiveness degree considering is defined for proceeds laundering on the part of another country. Data for 105 countries are used for calculation and results for Ukraine, Poland and Germany are represented. As a result, we can see that developed countries with high welfare level are attractive for developing countries for money laundering, countries with low welfare level, low economic development and unstable political situation are attractive for the developed countries. The proposed methodology is recommended to be introduced in the activity of banks' cybersecurity systems. It will allow identifying transactions of those countries for which the risk of legalization is high and introduce additional monitoring to regard the legitimacy of their financial sources. In addition, it is expedient to use the model in the activities of the country’s regulatory authorities, which will promote the introduction of cybersecurity standards and increase the ethics of financial relations between countries. Keywords: cybersecurity, money laundering, gravity modelling, country attractiveness, risk, expert approach, normalization, Minkowski metric.

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Section: Marketing and Management Of Innovations 2019 Issuementioning

confidence: 99%

The Innovative Approach to Increasing Cybersecurity of Transactions Through Counteraction to Money Laundering

Lieonov

Kuzmenko

Yarovenko

et al. 2019

MMI

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“…Domestic researchers in the sphere of risk management and in particular in the field of stress testing are represented by such scientists as I. М. Posokhov, O.O. Khodyreva (2018), Ramskyi A., Loiko V., Sobolieva-Tereshchenko O., Loiko D., Zharnikova V. (2017), Krykliy O., Luchko I., (2018). However, the fact that the use of stress testing is not wide-spread, makes it possible to judge about certain problems of the adaptation of the proposed methods to the current realities of the banking sector of the Ukrainian economy.…”

Section: Literature Reviewmentioning

confidence: 99%

Comparison worldwide and Ukrainian practice of bank stress testing

Ramskyi

Sobolieva-Tereshchenko

Жарнікова

2019

METOD

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Early stress tests, used primarily as risk management tools, date back as far as the 1990s. Programs conducted by the IMF, Bank of England, Dodd-Frank Act, Bank of Japan, Swiss Financial Market Supervisory Authority and the World Bank promoted the used of stress tests. The basic idea the introduction of stress testing was to ensure that banks have sufficient capital to cover their risks, and to ensure that banks and banking systems are more resilient to economic and financial shocks. This paper provides an overview of the recent implementation of stress testing by regulatory agencies in the United States, the United Kingdom, Japan, Switzerland and the European Union. This article also gives an overview of the stress testing methodology developed by the National Bank of Ukraine and in accordance with Basel III recommendations. The aim of research is comparative evaluation of key aspects of system-wide stress tests in different finance systems: Euro area, United Kingdom, Switzerland, Japan, the United States and Ukraine, identifying identification of similarities and differences and prospects for the development in our country. To substantiate the theoretical positions and reasoning of the conclusions general scientific methods are used, including system, abstract-logical approach, as well as methods of formalization, analysis and synthesis of information, comparative analysis. During the study, a comparative analysis of the stress-testing methodology in six countries was conducted. The scientific importance of the work lies in the fact that on the basis of the conducted research it is possible to improve stress-testing of Ukrainian banking system based on best practices from developed countries. The value of the research is that it is increasingly necessary to used best practices of stress tests as a powerful tool in risk management, in micro prudential and macroprudential policies. Results of researches can to used not only in development methodology of stress-testing, but also in case-study of banking.

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“…With the rising prominence of subprime crisis assessment to reveal the main causes, one of the assumptions has revealed to be inadequate following this crisis, and which was the origin of the incapacity and the inability of the prudential rules, designed by the Basel Committee since the late 1980s in order to guarantee financial and banking stability in dealing with this crisis; was the fact that these current regulations and rules have underestimated and reduced the liquidity risk (Krykliy & Luchko, 2018). At that time, the regulator believed that the solvency capitalization ratio was more than enough and sufficient as a pivot for banking regulation and believed that these two risks (solvency and liquidity) were completely independent.…”

Section: Introductionmentioning

confidence: 99%

Interaction between liquidity risk and bank solvency, a crucial effect in a framework of simultaneous equations

Khaled,

Fares,

Nazim

2023

FMIR

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The “2008-09” global financial crisis has underlined that the interaction between liquidity risk and bank solvency forms an important factor that makes banks particularly vulnerable to a global crisis. At the same time, stress-testing models do not consider the dynamics between solvency and liquidity risk the possibility of reducing the impact of stress on bank solvency and financial stability. In this context, the aim of this paper is to examine this highly relevant issue in the financial literature, and answer to the main question: Is the interaction between solvency and liquidity risk empirically significant in the context of the Algerian banks? Based on an econometric model using a simultaneous equation approach on panel data of 19 banks over 6 years running from (2016 to 2021). Our results validate our hypothesis about the interaction and show that these two risks are determined simultaneously. Building on this finding, we suggest that the authorities should emphasise developing integrated liquidity and solvency stress tests. Our results also show the need of the Algerian banks to set up a regulatory framework for liquidity in line with the international prudential regulations to enhance the performance of this sector.

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Model of Stress-testing of Banks’ Liquidity Risk in Ukraine

Cited by 4 publications

References 9 publications

The Innovative Approach to Increasing Cybersecurity of Transactions Through Counteraction to Money Laundering

The Innovative Approach to Increasing Cybersecurity of Transactions Through Counteraction to Money Laundering

Comparison worldwide and Ukrainian practice of bank stress testing

Interaction between liquidity risk and bank solvency, a crucial effect in a framework of simultaneous equations

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