Importance The problem of stability of credit institutions being a center of financial flows is particularly relevant for countries with developing economies. Objectives The paper aims to study the relation of the credit policy focused on loans to individuals and the bank's stability. Methods The study rests on analysis, synthesis, comparison and generalization methods. Results We consider various approaches to the definition of banking stability. There is a need to assess the category together with the credit organization's balance sheet. We define a set of indicators characterizing the bank's balance sheet, and analyze changes in selected ratios when implementing the credit policy focused on lending to individuals. Banks, using a retail lending model, have a bigger share of past due loans, less share of loan portfolio reserve, and less liquidity in the balance sheet. They considerably use retail deposits, but alternative sources of funding, like corporate deposits, issued securities, interbank loans are underutilized. At the same time, retail credit institutions have longer-maturity liabilities due to higher yield; the latter neutralizes the lower ratio of liquid assets to total assets. Conclusions If external factors are positive (no stress situations in the economy, growing demand for banking products), the retail lending model is more profitable. However, qualitative and structural characteristics of balance sheet are indicative of the lower degree of financial stability as compared to credit institutions with a more balanced portfolio in terms of the customer segment.
Keywords: customer deposits, loan portfolio, past due debt, reservation, liquid assets
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