Credit risks of Ukrainian banks under wartime conditions

Анотація

Introduction. The full-scale war has fundamentally reshaped the credit risk profile of Ukraine’s banking sector, shifting it from conventional cyclical variability to a regime dominated by structural and security-driven shocks. The destruction of production capacity, forced migration, logistics disruptions, energy constraints, and heightened volatility of exchange-rate and price parameters have destabilized borrowers’ cash flows and reduced the informational content of traditional financial indicators of creditworthiness. In this environment, credit risk materializes not only through portfolio quality deterioration, but also through banks’ behavioral adjustment – reallocating assets toward instruments with lower risk weights and higher liquidity – thereby transforming the mechanism of financial intermediation and compressing the economy’s credit depth. Purpose. This paper aims to substantiate the specific features of credit risk formation in Ukrainian banks under wartime conditions and to quantitatively identify the key macro-financial determinants driving the dynamics of overdue debt of non-financial corporations as an empirical manifestation of credit risk materialization. Methods. The study relies on systemic and institutional macro-financial approaches to credit risk analysis, complemented by Basel Committee supervisory principles emphasizing the portfolio nature of credit risk and the need for continuous identification, measurement, monitoring, and control. The analysis employs a structural–dynamic assessment of changes in the banking system’s asset composition (notably the shift from corporate lending toward government instruments and NBU operations), alongside a comparative evaluation of the monetary environment, credit pricing, and credit activity indicators. To test the hypotheses empirically, a multivariate regression framework is applied, modeling the share of overdue loans to non-financial corporations as a function of macro-financial factors (exchange-rate, inflation, production, debt-related variables, and the foreign-currency structure of the credit portfolio). Results. The findings demonstrate that wartime credit risk is distinctly structural and manifests along two interrelated dimensions: (1) persistently high overdue debt in the corporate segment amid uneven sectoral recovery; and (2) a reconfiguration of banks’ portfolio priorities toward low-risk government instruments and NBU deposit certificates, which amplifies the crowding-out of private investment and reduces credit depth. Economic and mathematical modeling confirms the predominance of the exchange-rate and foreign-currency channel in credit risk materialization: hryvnia depreciation and an increased share of foreign-currency loans are statistically significantly associated with a higher proportion of overdue corporate debt. By contrast, indicators of industrial dynamics, profitability, external debt position, and the key policy rate do not exhibit robust statistical significance within the specified model, suggesting an indirect impact transmitted via exchange-rate and price mechanisms, the presence of time lags, and structural breaks characteristic of the wartime period.

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