REGRESSION ANALYSIS OF THE IMPACT OF STRUCTURAL COMPONENTS OF BANKING CREDIT ON THE DYNAMICS OF PROBLEM LOANS AND ON THE LEVEL OF CREDIT RISK

Abstract

The functioning of the Ukrainian banking sector during 2019–2025 occurred under conditions of unprecedented challenges, including internal structural transformations, global fluctuations, and the severe consequences of the full-scale war. In this context, ensuring the stability of banking activities and minimizing credit risks becomes a strategic priority. The purpose of this article is to quantitatively assess and substantiate the impact of key macroeconomic determinants and structural components of lending on the level of credit risk in the banking system of Ukraine. The results of the study reveal a significant structural unevenness in credit risk distribution. It is proven that the corporate segment remains the primary source of systemic vulnerability with a consistently higher NPL ratio compared to the retail sector. The econometric analysis confirmed that the inflation rate and the USD/UAH exchange rate are the most statistically significant drivers of NPL dynamics. The study identified a specific negative correlation between these factors and the NPL ratio, which is interpreted as the "denominator effect": under conditions of high inflation and devaluation, the nominal growth of the loan portfolio (the denominator) outpaces the recognition of bad debts, mathematically reducing the relative share of NPLs despite the deterioration of borrowers' real solvency. Conversely, real GDP and the central bank's key policy rate did not demonstrate stable statistical significance in the extended model specification for the analyzed sample, likely due to multicollinearity and the specific reaction of monetary policy to inflation. The practical value of the article lies in the formulation of recommendations for improving credit risk management. Furthermore, stress-testing scenarios must prioritize inflation and exchange rate shocks with mandatory monitoring of borrowers' currency sensitivity. For the regulator, it is recommended to combine traditional NPL monitoring with an analysis of the nominal dynamics of the credit portfolio to mitigate statistical distortions caused by the "denominator effect" and to apply stricter supervision over high-risk segments.