| Abstract [eng] |
Assessing financial stability is important for policymakers and regulators to prevent and mitigate systemic risks that could lead to financial crises. A financial crisis can significantly impact the economy, including a sharp drop in output, increased unemployment, and a deterioration of social welfare. Therefore, identifying vulnerabilities and risks in the financial system and taking appropriate measures to address them is essential for maintaining a stable and sustainable financial system. Banks are usually the main participant in the financial system. In this work, the financial stability in the Baltic States will be assessed using the status of the main participant in the financial system in the market. To determine the financial stability of the Baltic countries, the scientific literature is analyzed, a research methodology is formed, and research is carried out according to the selected methods. Based on the study of the scientific literature and empirical research, the indicator analysis method is applied in work, the indicators are selected according to the CAMELS methodology, divided into sub-indices, and after choosing the weights of the sub-indices, an aggregated indicator of financial stability is formed. After calculating the sub-indices and the aggregated financial stability index, a correlation analysis is also performed. The results obtained after the research are presented. The study of financial indicators showed that most of the indicators were affected similarly in all Baltic countries. The main differences were revealed in Estonia when assessing capital adequacy indicators. Estonian banks had a higher level of protection when comparing the ratio of capital to assets and the percentage of non-performing loans to total loans compared to Latvia and Lithuania. In the case of Lithuania, it was possible to see a trend after the crisis period that the banking sector did not have extremely large fluctuations in the last years of the analyzed period, signaling financial stability. Latvian banks had various fluctuations during the analyzed period, but the most noteworthy point is that the country’s banks are sensitive to market changes, which signals a certain instability. After calculating the values of the financial stability index, it was found that the banks of the Baltic countries have been operating relatively stably in the last 10 years. Still, the Latvian banking sector has been in the intervals of the recommended rates for the longest time. The correlation analysis revealed the significance of the sub-indices of the Baltic countries and that the market sensitivity subindex was uniformly significant for the financial stability index in all the Baltic countries. |
