Evaluation of Sustainability and Efficiency in the Banking System of Latvia and Georgia

Global financial integration encourages close international cooperation and encourages various local banking systems to interact with each other. This leads to the need to evaluate and compare individual banks and banking systems of different countries. So, as cooperation between the countries develops, cooperation in the financial and banking sector also increases. Despite the fact that the banking systems of various countries are developing depending on national characteristics, in global economic cooperation, commercial banks need to ensure their activities in accordance with the factors of influence of general trends in the global economy. In the article, the authors consider the relationship between the stability and profitability of the banking systems of Latvia and Georgia, identify factors affecting the capital adequacy and profitability of banks in these countries. The purpose of the study is to identify the consequences of banking regulation in the countries under analysis and to predict the sustainability of banking systems based on the safety margin of capital. The results of the study showed the possibility of comparing the stability and profitability of banks operating in different economic conditions. Thus, capital adequacy in the Latvian banking sector is higher compared to the banking sector of Georgia. But at the same time, the safety margin of capital in the banking sector of both states is sufficient to carry out activities. The novelty of the study is that for the first time an analysis of the comparison of the functioning of the banking systems of Georgia and Latvia was carried out, and the level of stability of these banking systems was predicted based on the safety margin of capital.