A FOUR-DIMENSIONAL MODEL FOR ASSESSING THE INANCIAL STABILITY OF COMMERCIAL BANKS UNDER CIRCULAR ECONOMY CONDITIONS: METHODOLOGY AND EMPIRICAL RESULTS

Abstract

This article presents a new theoretical and methodological approach to assessing the financial stability of commercial banks under circular economy conditions. For the first time, financial stability is defined through a four-dimensional integrated approach combining operational (CIR, ROA, ROE), capital (CAR, NPL, liquidity), adaptive (stress-testing, diversification) and ecological-circular (GLR, ESG rating) components, the application of which increases assessment accuracy by 25-30%. The factors affecting financial stability are, for the first time, classified into six groups: macroeconomic, legal-regulatory, institutional, socio-demographic, internal-bank and ecological-circular. An empirical study of JSC “Milliy Bank”, JSCB “SQB” and JSCB “Asakabank” over 2021-2025 confirmed that the Z-score ranges from 27.35 to 66.58, placing all three banks in the stable zone (Z > 2.6) with no systemic bankruptcy risk. Based on the circular-adjusted model Z_green = (ROA + CAR + 0.5×GLR)/σ(ROA), the concept of a “green transformation threshold” (GLR ≥ 3-4%) is proposed. A strong inverse relationship (r = 0.87) was found between the level of digital transformation and the cost-to-income ratio (CIR). The author's original Green AI credit-scoring methodology and five strategic directions for ensuring banks' financial stability are proposed.