What is the link between cyclical systemic risk and bank solvency, and can we make it work for policymakers? This paper develops a framework for high-frequency monitoring of banking system health based on the link between the degree of accumulated vulnerabilities and bank solvency. Using local projection methods with a distributional focus, we show that this link is nonlinear, with substantially stronger effects in the lower tail of the profitability distribution. Downside impacts intensify during large exogenous shocks, such as wars and epidemics. Relying on regularly available supervisory data, the framework supports timely, evidence-based macroprudential monitoring under elevated uncertainty.
Introduction. The development of climate finance worldwide is driven both by the need for it and by the actual actions of countries in this area. At the same time, it should be borne in mind that the need for climate finance is dynamic. A comprehensive assessment of climate finance should be carried out in terms of volumes, dynamics, average annual values, sources (public or private, domestic or foreign), areas of financing, territorial distribution, the nature of the measures financed, and the instruments used. Problem Statement. The institutional framework for climate finance has evolved significantly in recent decades. Climate finance issues are the focus of numerous international organizations, national governments, and financial market regulators and need to be systematized and generalized in view of the significant evolution of the above-mentioned processes. The purpose is a scientific and practical assessment of the evolution of institutional support for climate finance in the world and its instruments. Methods. A systematic approach was applied, using monographic, historical, economic and statistical methods, as well as comparative and expert analysis methods. Results. Legislative, administrative, technological, institutional, and informational barriers to climate finance were identified, as well as the absence of an institutional framework to ensure the fulfillment of commitments made by countries under the Paris Agreement, which reduces the effectiveness of international climate regulation. The formation of institutional support for climate finance has been justified, within which policies on climate change are being developed in specific countries. Conclusions. The levels of climate finance achieved worldwide are insufficient to meet climate goals. Extremely insufficient funds are allocated for long-term financing, and its structure is dominated by state capital, with insufficient development of public-private partnerships in the accumulation, distribution, redistribution, and use of climate finance. Issues related to calculating the volume and structure of climate finance, ensuring the reliability and transparency of accounting, information, and reporting on climate finance also remain unresolved.
This paper examines the role of corporate governance and prudential supervision in mitigating the detrimental effects of the initial russian military invasion on the financial health of Ukrainian banks. We find that shock exposure depends on the scale of banking activity and pre-war credit risk assessments in the affected regions. This research provides evidence that enhanced governance and prudential supervision contributed positively to restoring bank financial positions following the initial attacks. Our findings demonstrate that central bank supervision yields a health-restoring effect primarily for war-sensitive banks, provided that these banks comply with regulatory requirements. Conversely, independent supervisory boards contribute more significantly to the recovery of unaffected banks. These results are robust and offer practical policy implications for both bankers and regulators.
This study presents estimates of the aggregate theoretically optimal capital adequacy level for the Ukrainian banking sector, calculated using a cost-benefit approach, which implies measuring the net effect of higher capital levels on the economy. The net effect is treated as the difference between expected macroeconomic benefits of raising capital and associated macroeconomic costs. The benefits are considered from the perspective of reducing the probability of a crisis occurring. The costs arise from the possibility that tighter capital requirements lead to a slowdown in real GDP growth due to the contraction of the lending supply. The results suggest that the optimal level of aggregate Tier 1 capital to risk-weighted assets ratio for Ukrainian banks is in the range of 9%-15%, which is understood to mean a certain capital 'safety cushion' for banks, rather than a regulatory minimum.
A security shock raises the cost of providing defense while leaving the quantity delivered untouched. Because defense is procured rather than bought on a market, it has no demand curve: what quantity survives a rise in its cost is a policy decision, and the state must choose between paying more and accepting less. I study that choice in a two-sector New Keynesian small open economy calibrated to Ukraine. The monetary problem is settled by a fiscal choice: how far the state lets its defense appropriation track the defense price sets whether the civilian economy expands or contracts, and with it the sign of the appropriate response. Across much of the range of stances the state might take, total and civilian inflation disagree in sign, so a bank targeting the total index tightens, whereas a bank targeting the civilian one eases. The index a central bank has chosen therefore fixes the sign of its response by itself. There is no single number for the monetary response to a security shock, and the model’s position is that none exists until the fiscal stance is fixed. I develop it as a minimal benchmark for wartime security economics, every omitted channel recorded rather than left implicit.
