Keywords
financial stability
banking risk management
financial market
banking institutions
How to Cite
Abstract
The article is devoted to the analysis of the early response system, which is an important element of the mechanism for ensuring the financial stability of banking institutions, in particular when carrying out transactions with derivative financial instruments. Given the increased complexity and dynamism of financial markets, the use of derivative contracts in the activities of banks is becoming increasingly relevant, but at the same time, it increases the risks and threats to financial stability. The article proposes a concept for modifying the existing systems for managing active operations of banking institutions by integrating an early response system, which allows for the timely identification of potentially problematic derivative financial instruments and an effective response to minimize possible financial losses. The modification involves the implementation of a structured system that includes several key stages: 1) identification of potentially problematic derivative financial assets using an appropriate set of early warning indicators; 2) classification – segmentation of identified potentially problematic derivative financial assets by quality categories; 3) application of necessary means of influence depending on the group to which the derivative financial asset was assigned; 4) assessment of results – control over deadlines, completeness, efficiency of implementation, as well as adjustment of measures. The early response system allows the bank to apply new methods and tools of financial management, in particular, the latest technologies for risk management in the context of the specifics of derivative financial instruments. This provides not only proactive risk management but also reduces the likelihood of financial losses in the event of negative scenarios. The implementation of such a system will allow banking institutions to actively respond to changes in the market situation, reduce the burden on units dealing with problem assets, and consider both internal and external threats. Thus, the proposed early response system is an effective mechanism for ensuring the financial stability of banking institutions for the prompt identification of potentially problematic derivative financial assets, preventing significant losses, and optimizing risk management at all stages of the bank’s activities.
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