TRANSFORMATION OF CREDIT RISK MANAGEMENT IN CONDITIONS OF MARTIAL LAW AND MACROECONOMIC INSTABILITY

Abstract

The article examines the transformation of credit risk management in the Ukrainian banking sector under martial law and macroeconomic instability. The study identifies fundamental changes in the nature of credit risk caused by the deterioration of borrowers’ financial resilience, disruptions in logistics chains, destruction of production and transport infrastructure, the decline in collateral value, and the rising probability of default. The need to revise traditional risk assessment methods and to apply adaptive PD, LGD, and ECL models in accordance with IFRS 9 requirements is substantiated, as these models allow for war-related shocks and the high volatility of the external environment. The article outlines key factors contributing to the deterioration of credit portfolio quality, including the growth of non-performing loans, loss of business liquidity, enterprise relocation, population migration, and declining domestic demand. Particular attention is devoted to the role of state support mechanisms —such as portfolio guarantees and the “5–7–9%” program — in mitigating credit risk and maintaining access to finance for businesses. The study demonstrates that digital analytical tools, Big Data, behavioural models, automated monitoring systems, and early-warning indicators significantly improve the accuracy of default prediction and the speed of managerial responses. Furthermore, the research emphasizes the importance of integrating macroeconomic monitoring with internal bank data to ensure a proactive risk management strategy. The role of continuous staff training and the adoption of flexible governance structures are highlighted as critical components for enhancing the resilience of credit risk frameworks. The study also considers the long-term implications of war-induced credit shocks on financial stability and regulatory compliance, providing recommendations for strengthening supervisory practices and improving transparency. Based on the conducted analysis, the article proposes an adapted model of credit risk management under wartime conditions. This model integrates financial, behavioural, and operational indicators, scenario-based stress testing, updated approaches to collateral evaluation, and the use of government support instruments. The findings confirm the necessity of a profound transformation of risk-management systems to strengthen the resilience of the banking sector and support the recovery of economic activity in Ukraine. The results of this study are expected to inform both policy makers and banking professionals on developing effective strategies for crisis management and sustainable economic recovery.