Use of causal analysis to improve the monitoring of the banking system stability

Abstract

According to the stages of the banking system stability monitoring, the analysis of caus-al links is used to identify the causes of the crisis trends spreading and the rationale for the most efective levers of regulatory infuence on the banking system parameters by the central bank. Te research is based on the use of the canonical correlation method for structuring causal links between the indicators for the assessment of the banking system stability, which are grouped into four sub-indices (assessing the intensity of credit and fnancial interaction in the interbank market, the efectiveness of the banking system functions, structural changes and fnancial disproportions in the banking system, activities of systemically important banks); the method of regression analysis and the calculation of elasticity coefcients is also used to assess the sensitivity of the banking system sta-bility to changes in parameters that characterize the banking regulation instruments. Te article analyzes the results of quantitative and qualitative assessment of the bank-ing system stability (comparison of actual results of the evaluation with the data for previous years and comparison of values of stability indicators with critical values). Te causes of detected deviations are determined taking into account the results of applying the canonical correlations method. Regression models have been constructed to confrm the dependence of the banking system stability index on the change in parameters that characterize banking regulation instruments, and to determine the most efective of them. Practical testing of submitted proposals is realized based on the Ukrainian banking system indicators for 2007–2016.