STRESS TESTING OF THE BANKING SYSTEM OF UKRAINE: TOOLS, SCENARIOS AND RESULTS IN WARTIME CONDITIONS

Abstract

This article explores the evolution of stress-testing practices within the Ukrainian banking system during wartime, particularly in the period from 2022 to 2024. The full-scale military invasion of Ukraine by Russia has introduced unprecedented risks that necessitate a reassessment of traditional methods for financial risk analysis and stress testing. The study highlights how the National Bank of Ukraine (NBU) has adjusted its approach to scenario modeling in response to infrastructure damage, forced migration, increased credit risk, and a greater reliance on state and international financial support.
Two primary stress-testing scenarios implemented by the NBU in 2023 are examined: the baseline scenario, which assumes partial economic recovery under stable security conditions, and the adverse scenario, which models economic deterioration under worsening wartime conditions. The impact of these scenarios on liquidity, capital adequacy, and non-performing loans (NPLs) is analyzed based on official NBU data. The paper also considers the integration of external macro-financial factors, such as international reserves and foreign aid flows, into stress-testing frameworks. A comparative mention is made of U.S. stress-testing regulation under the Dodd–Frank Act, serving as an international benchmark.
The results indicate that the Ukrainian banking sector has demonstrated a relatively high level of resilience despite extreme shocks. However, the article argues that further improvements are needed in the collection of regional risk data, the modeling of war-related systemic risks, and the development of long-term, multi-scenario planning frameworks.
The paper concludes by recommending enhanced cooperation with international organizations, the incorporation of behavioral and geopolitical risks, and the adaptation of Western practices to Ukraine’s specific wartime context. These measures are presented as essential for strengthening the financial stability of Ukraine’s banking system in the face of ongoing conflict and subsequent recovery challenges.