Stress testing in ensuring the stability of the banking sector

Abstract

The relevance of this study is driven by increasing macroeconomic instability, wartime risks, and growing financial threats to Ukrainian banks in the context of long-term economic transformation. Under such conditions, the introduction of effective preventive supervision mechanisms becomes especially important, as they help identify vulnerabilities in the banking sector in a timely manner and reduce the risk of systemic crises. The aim of this study is to provide a comprehensive assessment of the effectiveness of scenario modeling and macro-financial analysis in evaluating the financial stability of Ukraine’s banking system under conditions of increased uncertainty. The methodological framework of the study is based on official statistical and analytical data from the National Bank of Ukraine for the period 2014–2025. The research applies methods of financial and macroeconomic trend analysis, scenario forecasting, comparative assessment, integrated index analysis, and bank ranking according to financial reliability. The results reveal cyclical periods of increased financial stress, particularly in 2014–2015 and 2022, which had a significant impact on banks’ liquidity, profitability, and capitalization. The study shows that during 2021–2025, Ukraine’s banking system maintained a substantial liquidity buffer and the ability to sustain a positive interest margin despite tight monetary policy. The analysis of capital adequacy ratios indicates an overall sufficient level of financial stability, while also identifying individual institutions with increased vulnerability to adverse macroeconomic shocks. The stress-testing-based ranking confirms the dominant position of foreign-owned banks among the most stable institutions and highlights risk-prone segments among some private banks. The practical significance of the findings lies in their potential use for improving risk management systems, strengthening supervisory frameworks, and enhancing transparency in the functioning of the financial market. In particular, the results may support regulatory authorities and bank managers in developing more effective stress-testing procedures, early warning systems, and evidence-based policy measures.