Integration of Ukraine into the European banking system: cleaning, rebooting and Basel III

Andriy Ramskyi,Olena Sobolieva-Tereshchenko,Valeriia Zharnikova,Daria Loiko,Valeria Loiko

doi:10.21511/bbs.12(4-1).2017.05

Abstract

The urgency of the issue is related to changes in the Ukrainian banks’ business environment, taking into account the impact of domestic and global financial instability and the implementation of the regulatory framework for banking regulation of the National Bank of Ukraine in accordance with the Basel Committee on Banking Supervision recommendations. The main goal of this research is to analyze the degree of implementation and compliance with the Basel III regulations in Ukrainian banking system. To carry out the research, regulatory and legislative documents of the National Bank of Ukraine, the Basel Accords, statistic data of the Ukrainian banks and the National Bank of Ukraine were used. For this purpose, the analysis of main indicators of Ukrainian banks’ financial stability within the period of 2014–2017 is made. Thus, post-crisis regulatory changes have aimed at restoring bank stability. The results seem to suggest that bank regulatory changes may be repressive, for instance, cleaning and optimization of the banking system as an effective tool for anticrisis management. As a result, it was concluded that banks with foreign capital are the most stable in the banking system of Ukraine in comparison with domestic banks.

Highlights

Integration of Ukraine into the European banking sphere involves the introduction of common standards in the field of banking regulation
Under current conditions, the need to adapt Ukrainian banking legislation to the regulatory requirements of the European Union, on the one hand, and the elimination of the consequences of crisis phenomena that spread in the Ukrainian banking sector in 2008–2009 and 2013–2015, on the other, encourage the National Bank of Ukraine (NBU) to revise the approaches to risk management in the banking system towards the introduction of Basel III standards, the final transition to which is scheduled in the EU for 2019 (Basel Committee on Banking Supervision, 2017)
It is relevant to study the dynamics of certain indicators of banking activity and current trends in the banking sector of Ukraine in accordance with the implementation stages of Basel III recommendations

Summary

Introduction

Integration of Ukraine into the European banking sphere involves the introduction of common standards in the field of banking regulation. The increase in the proportion of non-performing loans against the background of catastrophic depreciation of the hryvnia make banks cut their staff, save on operating costs and commissions, revise revenue structures, optimize deposit and loan portfolios and postpone their ambitious innovation development projects till “better” times. In this situation, it is relevant to study the dynamics of certain indicators of banking activity and current trends in the banking sector of Ukraine in accordance with the implementation stages of Basel III recommendations. Under current conditions, the need to adapt Ukrainian banking legislation to the regulatory requirements of the European Union, on the one hand, and the elimination of the consequences of crisis phenomena that spread in the Ukrainian banking sector in 2008–2009 and 2013–2015, on the other, encourage the National Bank of Ukraine (NBU) to revise the approaches to risk management in the banking system towards the introduction of Basel III standards, the final transition to which is scheduled in the EU for 2019 (Basel Committee on Banking Supervision, 2017).

Objectives

Results

Conclusion