SOME CHALLENGES TO FINANCIAL STABILITY DURING THE ECONOMIC DOWNTURN

Abstract

Financial stability issues, arising during the COVID-19 pandemic and the ongoing conflict in Ukraine, have affected the problems of financial market instability: interest rates of commercial banks started to rise, inflation increased, affecting consumer solvency issues, the need for bank financing and investment opportunities decreased, part of the staff was lost, labour supply decreased, productivity declined due to emerging economic stabilisation problems. Financial stability cannot be achieved without effective operation of the financial system, which is explored in this article, based on the evaluation models of financial stability. These models illustrate the integral relationship between the impact of individual factors and the effects on the interest rates of commercial institutions, the impact of interest rates on household financing, and the assessment of the interaction between interest rates and inflation. The assessment of financial stability takes into account the performance, liquidity, solvency, and evaluation of adverse conditions of banks as financial institutions.