Abstract
Nowadays, there are many preconditions and circumstances for conducting shadow schemes in the financial market. Therefore, the level of risk of participation of bank and non-bank financial intermediaries in such schemes is assessed as high. The lack of a practical methodology for assessing the development trajectory of financial intermediaries raises the question of the need for preventive control and quality modeling of their growth dynamics. The study aims to identify and formalize the patterns of development paths of banking and non-banking financial intermediaries based on the Harrington desirability function, which will be used to identify risk patterns as indicative patterns of financial intermediaries’ participation in shadow schemes. The sample includes 13 banking institutions, 3 credit unions, 3 pawnshops, 3 insurance companies, and 3 financial companies. The obtained results showed the relationship between the financial intermediary risk level in terms of its participation in shadow schemes and the phases of the economic cycle as a catalyst for the economic dynamics of the formal and informal economy. Thus, in 2012–2015, most financial intermediaries were in the zone of most significant risk, especially banks, characterized by economic, social, and political instability. Today, banks are in the group with a controlled level of risk of participation in scheme operations. Over the years analyzed, a stable neutral level of risk of participation in shadow schemes was inherent in most non-bank financial institutions. They were less sensitive than banks to the phases of the economic cycle. AcknowledgmentAlina Bukhtiarova and Yevgeniya Mordan gratefully acknowledge financial support from the Ministry of Education and Science of Ukraine (0120U100473, 0121U100469).
Highlights
Long-term economic growth depends on the level of investment, which is due to the efficiency of the structure of financial intermediaries in the economic system
This paper proposes a methodological approach to build a model for estimating the development trajectories of banking and non-banking financial intermediaries based on a set of patterns
The interaction trajectories of financial intermediaries were built into 8 patterns formed based on Kohonen’s self-organizing maps and cluster analysis
Summary
Long-term economic growth depends on the level of investment, which is due to the efficiency of the structure of financial intermediaries in the economic system. The development and improvement of intermediary activities in the financial system increase the efficiency of savings and investment processes, positively affecting economic growth. There are many schemes of illegal financial flows in which banking and non-banking financial intermediaries participate. These schemes are carried out to legalize illegally obtained income, withdraw capital from the country, evade taxes, withdraw cash illegally through fictitious enterprises or pay for non-existent goods and services. Modeling the activities of banking and non-banking financial intermediaries will identify existing trends and develop strategies for further development
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