N°24-09: Cyclical systemic risk and banks’ vulnerability

What is the impact of cyclical systemic risk on future bank profitability? To answer this question, we study a large panel of Ukrainian banks between 2001 and 2023 comprising systemic events and wartime. With linear local projections we study the impact of cyclical systemic risk on bank profitability and following the original Growth-at-Risk approach we utilize quantile local projections to assess its impact on the tails of the future bank-level profitability distribution. We calibrate the countercyclical capital buffer, develop informative “Bank Capital-at-Risk” and “Share of vulnerable banks” indicators, and conduct scenario analyses and stress tests on profitability and capital adequacy.