Characteristics of the structure and trends of foreighn investors’ participation in the national banking system

Serhieieva Olena
PhD (Economics), Associate Professor, Department of Banking, Odesa National University of Economics, Odesa, Ukraine, E-mail: lenasergeeva2007@ukr.net, ORCID: https://orcid.org/0000-0002-5523-3894

Oliinyk Nelli
Bachelor of Finance and Banking, Specialization "Management of Bank Activities in the Financial Market", Odesa National University of Economics, Odesa, Ukraine, E-mail: onelli010904@gmail.com

Received: 11.06.2025    Аpproved: 23.06.2025    Рublished online: 25.07.2025

Cite this article:

Serhieieva O., Oliinyk N. (2025) Characteristics of the structure and trends of foreighn investors’ participation in the national banking system. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Osoblyvosti struktury ta tendencij uchasti inozemnyh investoriv u nacionalnij bankivskij systemi.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odesa National Economic University (ISSN 2313-4569), Odesa National Economics University, Odesa, No. 6 (331), pp. 52-58.

Abstract

The financial stability of Ukraine and other countries increasingly relies on the effective integration of domestic and foreign investment resources. However, the role of foreign capital in Ukraine's banking sector is a topic of debate. On one hand, banks with foreign investments enhance competition, improve the quality of banking services, and expand the range of offerings. On the other hand, an excessive presence of foreign capital can make the banking system more vulnerable to external shocks and destabilising factors. This vulnerability poses a risk to national economic interests and increases the level of external dependence. The role of banking institutions with foreign capital in Ukraine's financial system is characterised by several distinctive features, which are largely shaped by the structural dynamics of the economy and the maturity of its financial infrastructure. In the context of post-Soviet countries like Ukraine, which are undergoing economic transitions, foreign investment tends to focus significantly on the banking sector. This trend arises primarily because other elements of the financial system, such as the stock market, are still in a nascent stage of development and lack the robustness necessary to effectively attract and redistribute capital. The banking sector, in contrast, offers a more stable and accessible avenue for foreign investors, enabling them to establish a foothold in the market and contribute to financial intermediation. Moreover, the influx of foreign capital can enhance the competitiveness and efficiency of local banks, leading to improved services and broader financial inclusion for consumers. However, this concentration of foreign investment also poses certain risks, including the potential for increased vulnerability to global economic fluctuations and regulatory challenges. Ultimately, the predominance of foreign capital in Ukraine's banking sector is indicative of both the opportunities and challenges present in its evolving economic landscape. As the country continues to navigate its financial development, the interplay between foreign investment and local banking institutions will play a crucial role in shaping the future of its financial system. Therefore, it can be concluded that banks with foreign capital are gradually adapting to modern challenges and are slowly restoring their profitability and financial stability. However, the noticeable lag behind the average indicators in Ukraine's banking system highlights the necessity for further improvements in development strategies, enhancements in competitiveness, and better adaptation to the specific conditions of the Ukrainian financial market.

Keywords

foreign banking capital, banks with foreign capital, economic development, national economy.

JEL classification: G210;DOI: https://doi.org/10.32680/2409-9260-2025-6-331-52-58

UD classification: 336.717(477):330.32

References

1. Tykhyj O.H. (2023). Evaluation of the activities of foreign banks in Ukraine. Ekonomika ta suspil'stvo, 55. DOI: https://doi.org/10.32782/2524-0072/2023-55-55. Retrieved from https://economyandsociety.in.ua/index.php/journal/article/view/2876. (accessed 20 April, 2025). [In Ukrainian].
2. Mordan', Ye.Yu., Bozhko, M.I., & Zymohliad, A.V. (2017). Foreign Capital in the Banking Sector of Ukraine. Ekonomika i suspil'stvo, 12. Retrieved from https://economyandsociety.in.ua/journals/12_ukr/94.pdf. (accessed 20 April, 2025). [In Ukrainian].
3. Evrоpеаn Cеntrаl Bаnk. Rеpоrt оn EU Bаnking Structure. (2023). Retrieved from https://www.ecb.europa.eu/press/pubbydate/html/index.en.html?name_of_publication=Press%20release. (accessed 20 April, 2025). [In English].
4. Hajduts'kyj A. (2023). Attracting foreign capital: wartime case. Ekonomichnyj prostir, 3, 30-41. DOI: 10.31617/3.2023(128)03. Retrieved from https://journals.knute.edu.ua/foreign-trade/article/view/1860/1733 . (accessed 30 April, 2025). [In Ukrainian].
5. Nikol'chuk, Yu. M., & Lopatovs'ka, O. O. (2023). Investment attractiveness of Ukraine: trends, problems and solution key vectors. Innovation and Sustainability, 1, 164-175. DOI: https://doi.org/10.31649/ins.2023.1.164.175. Retrieved from https://ins.vntu.edu.ua/index.php/ins/article/view/158. (accessed 30 April, 2025). [In Ukrainian].
6. Hirchenko, T.D., Storozhenko, O.O., & Shejko, O.P. (2017). Analysis of the current state and prospects of banks’ development of foreign banking groups in Ukraine. Hlobal'ni ta natsional'ni problemy ekonomiky, 16. 670-675. Retrieved from http://global-national.in.ua/ archive/16-2017/132.pdf. (accessed 05 May, 2025). [In Ukrainian].
7. Heiets' V. (2006). Foreign Capital in the Banking System of Ukraine. Dzerkalo tyzhnia, 26, 1-8. Retrieved from https://zn.ua/ukr/finances/inozemniy_kapital_u_bankivskiy_sistemi_ukrayini.html. (accessed 01 May, 2025). [In Ukrainian].
8. Koz'muk, N. I., Hirniak, V.V., Semehen, N.P., Drebot, N.P., & Druhova, V.T. (2019). Risks of expansion of foreign capital on the domestic financial market. Marketing and Management of Innovations, 3 (30), 361-370. DOI: https://doi.org/10.18371/fcaptp.v3i30.179726. Retrieved from https://fkd.net.ua/index.php/fkd/article/view/1964. (accessed 05 May, 2025). [In Ukrainian].
9. Prykaziuk, N., & Satsiuk, M. (2020). Banks with foreign capital in Ukraine: controversies and prospects of developmen. Ekonomichnyj analiz, 1(1), 183-191. DOI: https://doi.org/10.35774/ econa2020.01.01.183. Retrieved from http://nbuv.gov.ua/UJRN/ecan_2020_30_1%281%29__22. (accessed 05 May, 2025). [In Ukrainian].
10. Natsional'nyj bank Ukrainy. Nahliadova statystyka. Ofitsijnyj veb-sajt. Retrieved from https://bank.gov.ua/ua/statistic/supervision-statist. (accessed 15 May, 2025). [In Ukrainian].