Sufficiency of capital in providing financial stability of activities of banks of Ukraine

Radova Natalia
Ph. D. in Economics, Senior Lecturer of the Department of Banking, Odessa National University of Economics, Odessa, E-mail:radovanatalya1982@gmail.com

Cite this article:

Radova N. (2021) Sufficiency of capital in providing financial stability of activities of banks of Ukraine. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Dostatnist kapitalu u zabezpechenni finansovoyi stabilnosti diyalnosti bankiv Ukrayini; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odessa National Economic University (ISSN 2313-4569), Odessa National Economics University, Odessa, No. 11-12 (288-289), pp. 56-67.

Abstract

The purpose of this article is the is to analyze the current state of capital adequacy of banks and formulate proposals for its regulation in conditions of uncertainty and risk.. The methods used to conduct the comparative analysis of international and national standards of bank capital regulation, coefficient and regulatory method to determine general trends in capital adequacy of Ukrainian banks. Results of the article. The article proves that the adequacy of equity realized through the functions it performs, and thus affects the development of the real sector of the economy. These include basic, auxiliary and strategic. The principles for ensuring the capital adequacy of banks have been nurtured, namely: complexity, functionality, efficiency, adaptability and transparency. The article improves the mechanism of formation and regulation of the bank’s capital adequacy and conducts a comparative analysis of the concepts of banks' equity adequacy. Banks of Ukraine analyzed for their capital adequacy. The scientific novelty of the article is to prove the relationship between the widespread of digital technologies in the banking sector and the increase in the implementation of operational risk. We also propose to use factor analysis as a tool for assessing operational risk, as well as to create databases in which to record cases of operational risk. Considering current trends in the capital adequacy of Ukrainian banks, the article highlights several key aspects: banks' compliance with regulatory requirements on capital adequacy and the concentration of bank capital. The practical significance of this work lies in the established relationship between the capital adequacy of banks and their financial stability. It is proved that in the phase of active lending banks should form a conservation buffer, and in the phase of excessive unsecured lending - a countercyclical buffer. The amount of banks' contributions to the formation of these buffers should be set differently depending on the structure of problem debt in the bank and the phases of the cycle of its formation in the banking system.

Keywords

bank, capital, capital adequacy of banks, economic standards, coefficient method, financial stability.

JEL classification: J210

UD classification: 336.71:330.14

References

1. Alekseyenko, M. D. (2020). Kapital banku: pytannya teoriyi ta praktyky: Monohrafiya. K.: KNEU. [In Ukrainian].
2. Dulʹsʹka V.I. (2016). Bank equity: its functions and components. Zhytomyrsʹkoho derzhavnoho tekhnolohichnoho universytetu. Seriya: Ekonomichni, 3 (53), 3, 127-139. [in Ukrainian].
3. Lysenok, O.V. (2020). Improving the nature and classification of bank equity. Formuvannya rynkovykh vidnosyn v Ukrayini, 1 (224), 24–30. [in Ukrainian].
4. Kulish, G.P., Kirsenko, Y.V. ( The mechanism of bank capital formation in modern conditions. Hlobalʹni ta natsionalʹni problemy ekonomiky, 17, 672-676. [In Ukrainian].
5. Ostrovskaya, N.S., Shvets, O.Y. (2017). Capitalization of the banking system: current status and prospects in the transformational conditions of Ukraine's economy. Prychornomorsʹki ekonomichni studiyi, 21, 145-150. [In Ukrainian].
6. Panova, G. S. (1996). Analiz finansovogo sostoyaniya kommercheskogo banka. M.: Finansy i statistika [in Russian].
7. Zveryakov, M.I., Kovalenko, V.V. Bank capital: the requirements of Basel III. Finansy Ukrayiny, 6, 13–23. [In Ukrainian].
8. Kovalenko, V., Sheludko S., Radova N., Murshudli F., & Gonchar K. (2021). International standards for bank capital regulation. Financial and credit activity: problems of theory and practice, 1, 36. 35-45. DOI: https://doi.org/10.18371/fcaptp.v1i36.227609/.
9. Naumenkova, S.V., VI Mishchenko, V.I. & Mishchenko, S.V. (2017). Macroeconomic aspects of capital adequacy assessment of Ukrainian banks. Finansovo-kredytna diyalʹnistʹ: problemy teoriyi ta praktyky, 2, 4-16. [In Ukrainian].
10. Vovchak, O.D., Dmmitrenko, I.B. (2020). Consideration of concentration risk within the concept of the bank's internal capital adequacy assessment procedure: methodological and applied aspects. Visnyk Universytetu bankivsʹkoyi spravy., 2020, 2 (38), 11-20. [In Ukrainian].
11. Krykliy, O.A., Lor, A.K. (2020). Bank capital adequacy: influencing factors and external support mechanism. Efektyvna ekonomika, 12. Retrieved from: http://www.economy.nayka.com. ua/?op=1&z=8398. DOI: 10.32702/2307-2105-2020.12.73.
12. Didenko, I. V.,,Yefimenko, A.Yu. (2021). Analytical assessment of indicators of capitalization of the banking system and macroeconomic stability in Ukraine. Visnyk SumDU. Seriya «Ekonomika», 2, 118-125. ’DOI: 10.21272 / 1817-9215.2021.2-14. [in Ukrainian].
13. The Verkhovna Rada of Ukraine. (2000). Law of Ukraine “On Banks and Banking”. Retrieved from https://zakon.rada.gov.ua/laws/show/2121-14#Text [In Ukrainian].
14. Habbard, R. Hlen. (2004). Hroshi, finansova systema ta ekonomika. K.: KNEU [In Ukrainian].
15. Miller, R. L., Van-Khuz, D. D. (2000). Sovremennyye den'gi i bankovskoye delo. M.: Infa-M. [in Russian].
16. Ofitsiynyy sayt Natsionalʹnoho banku Ukrayiny (2021). Statistics. Retrieved from https:// bank.gov.ua/ua/statistic/supervision-statist/data-supervision#2. [In Ukrainian].
17. Natsionalʹnyy bank Ukrayiny (2021). The plan for the implementation of regulations for banks in 2021-2024 has been updated. Retrieved from https://bank.gov.ua/ua/news/all/onovlenoplan-uprovadjennya-regulyatsiy-dlya-bankiv-u-2021-2024-rokah.