Theoretical foundations for defining the economic essence of the concept of 'financial security of banks' and the formation of a system to ensure it

Azarenkov Serhii
PhD Student of the Department of Banking, Odesa National University of Economics, Odesa, Ukraine, E-mail: serdgzhio@gmail.com, ORCID: https://orcid.org/0000-0002-1159-8699

Cite this article:

Azarenkov S. (2024) Theoretical foundations for defining the economic essence of the concept of 'financial security of banks' and the formation of a system to ensure it. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Teoretychni zasady vyznachennja ekonomichnoi sutnosti ponjattja «finansova bezpeka bankiv» I formuvannja systemy ii zabezpechennja; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odesa National Economic University (ISSN 2313-4569), Odesa National Economics University, Odesa, No. 12 (325), pp.36-44.

Abstract

Modern conditions for conducting banking business are associated with macroeconomic uncertainty, threats posed by martial law and political turbulence, unprecedented cyberattacks, violations of financial monitoring regulations, and the loss of banks' client base due to migration, fatalities, and the destruction of production infrastructure. It should also be noted that under such conditions, banks often resort to unjustified aggressive policies in conducting their business to form the necessary resource base and maintain liquidity and profitability. In these challenging conditions, the issue of banks' financial security becomes highly relevant. The article highlights the theoretical foundations for defining the concept of 'financial security of banks' and approaches to forming a system to ensure it. The purpose of the article is to systematize and analyze scientific perspectives on the essence of the concept of 'financial security of banks,' as well as to define the target benchmarks and principles of its organization. The research employs methods of analysis and synthesis, a systematic approach, evolutionary principles, and comparison. A critical analysis of scientific literature on the definition of financial security of banks has been conducted. It is proven that financial security is associated with mitigating systemic risks, the ability to quickly and adequately respond to changes in the financial environment, optimizing conditions for the effective functioning of banking infrastructure, cybersecurity, and payment security. The article provides an original definition of this concept, emphasizing the use of innovative technologies to identify threats of various types and impacts. Prospects for further research are outlined, focusing on the causes and nature of emerging risks.

Keywords

banks, financial security, threats, banking sector, systematic approach, innovative technologies, risks.

JEL classification: G210, G320, B410; DOI: https://doi.org/10.32680/2409-9260-2024-12-325-36-44

UD classification: [336.71:005.934]:33.01

References

1. Hu, Y., Hong, Y., Feng, K., & Wang, J. (2022). Evaluating the Importance of Monetary Policy Uncertainty: The Long- and Short-Term Effects and Responses. Evaluation Review, October, Retrieved from: https://doi.org/10.1177/0193841X221124434. (accessed 15 November 2024). DOI: https://journals.sagepub.com/doi/pdf/10.1177/0193841X221124434
2. Bianchi, J., Bigio, S. (2022). Banks, liquidity management, and monetary policy. Econometrica, 90, 1, 391-354. DOI: https://doi.org/10.3982/ ECTA16599. (accessed 15 November 2024).
3. Wang Y., Whitted T., Wu Y., & Xiao K. (2022). Bank Market Power and Monetary Policy Transmission: Evidence from a Structural Estimation. The Journal of Finance, 77,4, 2983-2141. DOI: https://doi.org/10.1111/jofi.13159. (accessed 15 November 2024).
4. Caldara D., Herbst E. (2019). Monetary Policy, Real Activity, and Credit Spreads: Evidence from Bayesian Proxy SVARs. American Economic Journal: Macroeconomics, 11 (1), 157-92. DOI: https://doi.org/10.1111/jofi.13159. (accessed 15 November 2024).
5. Stiglitz J. E. (2010). Risk and global economic architecture: why full financial integration may be undesirable. American economic review, 100 (2), 388–392.
6. Anderson R. (2020). Security engineering: a guide to building dependable distributed systems : monograph. Indianapolis : Wiley.
7. Kovalenko, V. V. (2022). Financial security of banks under martial law. Finansovyi prostir, 4 (48), 81-93. DOI: https://doi.org/10.18371/fp.4(44).2022.819394. (accessed 16 November 2024). [Іn Ukrainian].
8. Baranovskyi O. I., Lahno A. A. (2022). The nature of financial security of the banking system. Svit finansiv. Finansova bezpeka, 3 (72), 141–156. DOI: https://doi.org/10.35774/SF2022.03.141 (accessed 16 November 2024). [Іn Ukrainian].
9. Fimiar S. V., Simakov S. G. (2024). Theoretical foundations of ensuring the economic security of banking institutions. Tavrijs'kyj naukovyj visnyk. Seriia: Ekonomika, 21, 127-132. Retrieved from https://doi.org/10.32782/2708-0366/2024.21.13. (accessed 17 November 2024). [Іn Ukrainian].
10. Mordan Ye. Iu., Zhuravka O. S., Didenko K. V., & Kravchenko Ya. I. (2021). Financial security of the Ukrainian banking system: essence and assessment. Biznes-Inform, 1. Retrieved from https://www.business-inform.net/export_pdf/business-inform-2021-1_0-pages-243_251.pdf. (accessed 17 November 2024). [Іn Ukrainian].
11. Vasylchyshyn O. B. (2018). Financial security of the banking system of Ukraine in the conditions of threatening trends of capital withdrawal. Vcheni zapysky Tavrijs'koho natsional'noho universytetu imeni V. I. Vernads'koho. Seriia: Ekonomika i upravlinnia, 29 (68), 1, 73–83. [Іn Ukrainian].
12. Britan V. V. (2024). Development of theoretical foundations of the essence of financial security of the banking system. Naukovyj pohliad: ekonomika ta upravlinnia, 3 (87), 60-66. Retrieved from https://doi.org/10.32782/2521-666X/2024-87-10. (accessed 18 November 2024). [Іn Ukrainian].
13. Strategy of Economic Security of Ukraine for the period until 2025: Decree of the President of Ukraine. Retrieved from https://www.president.gov.ua/documents/3472021-39613. (accessed 15 November 2024). [Іn Ukrainian].
14. Strategy for ensuring state security: Decree of the President of Ukraine. Retrieved from https://www.rnbo.gov.ua/ua/Ukazy/5264.html. (accessed 15 November 2024). [Іn Ukrainian].
15. Concept of ensuring national security in the financial sector: Order of the Cabinet of Ministers of Ukraine. Retrieved from https://zakon.rada.gov.ua/laws/show/569-2012-%D1%80#Text. (accessed 15 November 2024). [Іn Ukrainian].
16. National Bank of Ukraine. Strategy "Financial Fortress of Ukraine". 2023. Retrieved from https://bank.gov.ua/ua/about/strategy. (accessed 18 November 2024). [Іn Ukrainian].
17. Strategy for the development of fintech in Ukraine until 2025. Sustainable development of innovations, cashless and financial literacy. National Bank of Ukraine, July 9, 2020. Retrieved from https://bank.gov.ua/ua/file/download?file=Strategy_finteh2025.pdf. (accessed 18 November 2024). [Іn Ukrainian].
18. Hrytsenko R. (2003). Economic security of the banking system of Ukraine. Visnyk Natsional'noho banku Ukrainy, 4, 27–28. [Іn Ukrainian].
19. Yermoshenko M. (2001). Finansova bezpeka derzhavy: natsionalni interesy, realni zahrozy, stratehiia zabezpechennia : navchalnyi posibnyk [Financial security of the state: national interests, real threats, strategy of ensuring: a study guide]. Kyiv : KNTEU. [Іn Ukrainian].
20. Yevchenko N. H., Kryklii O. A. (2009). Impact of tax risks on the bank’s financial security. Problemy i perspektyvy rozvytku bankivskoi systemy Ukrainy: zbirnyk naukovykh prats, 25, 45–52. [Іn Ukrainian].
21. Vovk V. Ia. (2012). Theoretical basis for ensuring financial security of a bank. Problemy ekonomiky, 4, 200–204. [Іn Ukrainian].
22. Dmytrov S. O. (2012). Financial security management of a commercial bank. Finansovyi prostir, 2(6), 11–15. [Іn Ukrainian].
23. Tkachenko S. I. (2009) International banking and financial security in the world. Ekonomika ta derzhava, 11, 76–78. [Іn Ukrainian].
24. Hrebeniuk N. O. (2016). Financial security of banks: a system for identifying threats and eliminating risks. Visnyk Kharkivskoho natsionalnoho universytetu imeni V. N. Karazina. Seriia “Ekonomichna”, 91, 53–64. [Іn Ukrainian].
25. Shcherbatykh D. V., Shpylovyi B. V. (2016). Approaches and threats to the formation of financial and economic security of banking institutions. Visnyk Cherkaskoho universytetu. Seriia “Ekonomichni nauky”, 1, 141–148. [Іn Ukrainian].
26. Larionova K. L., Khmyz O. M. (2020). Assessment of the security level of the banking system of Ukraine. Visnyk Khmelnytskoho natsionalnoho universytetu. Ekonomichni nauky, 4, 1, 123–129. DOI: https://doi.org/10.31891/2307-5740-2020-284-4-23 (accessed 12 November 2024). [Іn Ukrainian].
27. Davydenko N. M, Kolodiazhna V. O. (2020). Assessment of the financial security of the banking system of Ukraine. Naukovyi visnyk Khersonskoho derzhavnoho universytetu. Seriia “Ekonomichni nauky”, 40, 51–58. [Іn Ukrainian].
28. Kryshtal H. O. (2023). Financial security of the banking system of Ukraine under martial law: classification of possible threats. Menedzhment ta pidpryiemnytstvo: trendy rozvytku, 4(26), 39–47. Retrieved from https://management-journal.org.ua/index.php/journal/article/view/469/244. (accessed 17 November 2024). [Іn Ukrainian].
29. Karcheva H., Karcheva I. (2022). Theoretical and practical aspects of managing financial and economic security of banks. Ekonomichnyi analiz, 1, 32, 168–198. Retrieved from https://www.econa.org.ua/index.php/econa/article/view/2018/6565657073. (accessed 17 November 2024). [Іn Ukrainian].
30. Systemic Risk Survey Results – 2024 H2. Retrieved from https://www.bankofengland.co.uk/systemic-risk-survey/2024/2024-h2. (accessed 17 November 2024).
31. Girman Y. V. (2018). Prerequisites for creating an optimal model for ensuring the financial security of a bank based on world experience. Investytsii: praktyka ta dosvid, 2. 49-53. [Іn Ukrainian].