RISK MANAGEMENT IN THE BANKING SYSTEM AND ITS IMPACT ON FINANCIAL STABILITY

The presence of risk management systems in financial institutions, particularly in banks, was of primary importance not only for large economies and countries with developed markets. The banking system played the central role in any economy. Additionally, financial institutions around the world were so closely linked to the fact that one of the banks' inability to pay their debts could cause a chain reaction that will lead to the failure of the global financial system. At the same time, a large number of individuals and institutions, including customers, agents, borrowers, lenders, shareholders and other stakeholders may suffer. As history showed, the negative effects of the banking crisis could quickly affect the entire economy in terms of lending reduction and other mechanisms. These were just the basis of systemic risk.