INVESTMENT POLICY AND ITS ROLE IN OPTIMIZATION OF THE BANK'S ASSET STRUCTURE AND MANAGEMENT OF NON-PERFORMING ASSETS

Abstract

The relevance of this study is driven by the fact that under conditions of heightened macroeconomic uncertainty and volatility, the task of ensuring the financial stability of both the banking system and individual banks becomes critically important. The traditional lending-oriented banking business model faces a significant increase in the share of non-performing loans (NPLs), which adversely affects the liquidity and capitalization of financial institutions. In this context, investment policy, including the management of securities portfolios, liquid reserves, and other investment instruments, increasingly performs not only a revenue-generating function but also a balancing one: maintaining liquidity, offsetting credit risk losses, and creating additional financial opportunities for managing distressed debt.The purpose of this article is to provide a theoretical substantiation and develop practical recommendations for formulating a bank's investment policy as a tool for optimizing its asset structure and effectively managing non-performing loans. The methodological framework of the study comprises methods of logical generalization and synthesis, a systems approach, as well as statistical analysis of the Ukrainian banking sector's performance indicators. The paper utilizes comparative methods to evaluate the effectiveness of various investment policy types.The article demonstrates that under modern conditions, a bank's investment policy functions as a compensatory mechanism, allowing for the mitigation of negative consequences arising from the accumulation of distressed assets. The author classifies the main types of investment strategies and determines their impact on liquidity and profitability ratios. The high efficiency of securitization is proven as a mechanism that integrates the attraction of investment capital with the process of cleaning the balance sheet of non-performing loans. Drawing on the successful implementation of the "Sunrise" projects by the Piraeus Bank Group (Greece), it is substantiated that transforming NPL portfolios into structured securities allows for a radical optimization of the asset structure, reducing credit risk exposure without sacrificing operational liquidity.It is revealed that the active utilization of investment policy instruments enables a bank to maintain its capital adequacy ratio even amidst deteriorating credit portfolio quality, thereby ensuring operational resilience in compliance with NBU requirements and international standards.