Evaluation of financial stability of commercial banks

Askoldas Podviezko

Doctoral dissertation

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The dissertation is devoted to the problem of financial stability. It is a task of major importance as stable and developed financial system has a strong positive effect on growth of country‘s economy. On the other hand, financial crises may obliterate the growth effect.

Investigation of processes of the financial liberalisation, which commenced in Lithuania in 1992, together with merging of the functional perspective of financial intermediation with the theory of general economic equilibrium, disclosed the following factors, which increase financial stability: lowering information asymmetry in the financial sector and fostering competition of financial intermediaries in terms of financial stability. The factors are influenced by prompt delivering information of evaluation of financial stability of commercial banks by using proposed in the dissertation methodology of evaluation of financial stability of commercial banks, which delivers results of evaluation in understandable formats to different groups of decision-makers.

The dissertation consists of an introduction, three chapters, a concluding chapter, and annexes.

In the first chapter the problem of financial stability is investigated, processes of transformation of the economy and of the financial liberalisation are analysed. It is concluded that the financial liberalisation increases financial instability. A positive effect of the financial liberalisation can be achieved, when the financial system is stable, the supervision of the financial system is effective, information asymmetry in the financial sector is low, a high transparency level is achieved. Influence of the structure of the financial system on financial stability is investigated. A quantitative criterion, which characterises the type of financial system, is proposed, the type of the Lithuanian financial system is determined.

In the second chapter the problem of choice of methods of evaluation of financial stability of commercial banks is investigated. A multiple criteria evaluation methodology is proposed.

The third chapter is devoted to the implementation of the methodology. Results of evaluation of commercial banks registered in Lithuania are presented. It is argued that the financial supervision institution is the most suitable for a successful implementation of the methodology. In the case of Lithuania it is the Bank of Lithuania.

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DOI: https://doi.org/10.20334/2141-M

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145×205 mm
160 p.
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