Economic capital in risk management of the bank

Shevchuk Anton
Candidate of Еconomic Sciences, Teacher, Ternopil National Economic University. E-mail:shevchukant@ukr.net

Cite this article:

Shevchuk A., (2018) Economic capital in risk management of the bank. Ed.: М.D. Baldzhy (ed.-in-ch.) and others [Systema pensiinoho zabezpechennia Ukrainy ta yevrointehratsiini protsesy; za red.: М. D. Baldzhy (gol. red.)], Scientific Bulletin of the Odessa National Economic University (ISSN 2313-4569), Odessa National Economics University, Odessa, No. 8(260), pp. 190-211.

Abstract

The financial and economic crisis of 2008-2009 allowed the Basel Committee on Banking Supervision and central banks of developed countries to draw conclusions on the need to expand the functions of banking supervision on the microeconomic aspect (supervision of certain banking institutions) on the macroeconomic aspect, which envisaged an analysis of the functioning of the entire banking system in interconnection with non-bank financial and credit institutions and the real sector of the economy. Such an expansion of the functions of banking supervision was aimed at timely detection of macroeconomic risks that have a significant impact on the level of economic capital of banks. The systematization of approaches to the analysis and supervision of macroeconomic risks in professional literature and banking practices was called "macroprudential policy" or "macroprudential supervision". In times of crisis, the size of economic capital as capital for covering credit, market and operational risks, as well as capital for development through the use of operational and strategic buffers in order to innovate and adopt anti-crisis decisions, becomes more significant. The focus of macro-prudential supervision in this context should be on the effectiveness of risk management in order to reduce costs, deductions to reserves, which will lead to an increase in retained earnings, and hence of total economic capital. The article deals with the capitalization of the banking system of Ukraine. The macroprudential regulation of the National Bank of Ukraine on increasing the capitalization of the banking system of Ukraine is researched. As a result of the study, two of the most promising directions of macro-prudential supervision in Ukraine.

Keywords

economic capital, risk, uncertainty, probability, regulatory capital, risk management.

JEL classification: F590

UD classification: 336.7

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