The banking sector plays a crucial role in the modern economy and serves as a significant catalyst for its development and stability. A well-functioning banking system is essential to ensure the effective functioning of other sectors of the economy, including support for businesses, households, and investors. However, the banking sector’s substantial importance and significance also make it particularly sensitive to various risks and uncertainties. First and foremost, financial instability in the banking sector can impact the overall economy. It can lead to downturns and crises. Such events emphasize the importance of studying and analyzing the risks associated with banking activities and developing effective mechanisms for their management. This article aims to investigate the stability of the banking sector and its interrelation with economic development. The authors analyzed the banking system’s key risks, such as credit, liquidity, market, and operational risks. In addition, they examined the impact of such factors as macroeconomic changes, regulatory measures, and innovations on the financial stability of banks. Furthermore, the effectiveness of different tools and methods to reduce the risks and ensure the banking sector’s stability is considered. The studies aim to increase the scientific understanding of the issues mentioned above and provide practical recommendations for making reasonable decisions in the sphere of banking policy. The research findings will be helpful for scholars, economists, financial institutions, regulators, and all stakeholders working in the field of financial stability and economic development.

Highlights

• The authors highlight the importance of improving banks’ monitoring, regulation, and supervision to ensure their stability and support economic development.