Deposit Guarantee Fund Research Articles

Implementation of the mechanism of systemic risk internalisation in the deposit market (pigou tax principle)

The deposit guarantee fund’s rate cap mechanism was supplemented by a systemic risk fee based on the Pigou tax principle. The additional systemic risk fee was introduced to curb overly aggressive price competition in the deposit market by creating additional explicit financial costs that can offset the gains to individual banks from increasing their deposit market share. However, the existing inelasticity of the implemented mechanism, manifested by the lack of stable pressure across the entire range of rates, necessitates its reform. In this article the authors reveal the details of the implemented mechanism of internalisation of systemic risk in the deposit market, the reasons that prompted its implementation, assessment of its success and ways of further reform.

Basis for Legislating to Institutionalize Personal Deposit Protection System

The article conducts a legal analysis of approaches to understanding the nature of the powers of the Deposit Guarantee Fund for Individuals, impacting the institutional reform of the respective deposit guarantee system. The author delineates the powers of the Fund. According to the proposed approach, the powers of the Fund regarding the functioning of the deposit guarantee system are divided into two subgroups: managerial and entrepreneurial. Managerial functions aim to institutionalize the deposit guarantee system itself. They are oriented towards the interaction of the Fund with banks participating in this system rather than towards depositors. Entrepreneurial powers essentially represent a specialized form of commercial activity, involving measures to preserve and increase the funds collected from participants in the deposit guarantee system. Powers related to ensuring the functioning of the deposit guarantee system for individuals, both managerial and entrepreneurial, are inherent to the Fund and require further development in accordance with international standards and Ukraine’s European integration commitments. It is essential to ensure a balance between state intervention and self-regulation through market instruments in the relevant sphere. Additionally, regulatory, administrative, and supervisory powers are separately highlighted, primarily concerning the removal of insolvent banks from the market and bank liquidation procedures. During the institutional reform of the Fund, it is necessary to review these powers, taking into account their nature and the constitutional regulation of relevant legal relationships. In particular, it should be noted that the concepts of “deposit guarantee” and “deposit insurance” are legally distinct in nature. This is a crucial aspect that further elucidates the functional orientation of the Fund’s powers, the specific procedure of its formation, and, most importantly, its role and significance in the banking system of Ukraine. It is critically important for the entire deposit guarantee system for individuals, as well as the removal of banks from the market to be legally transparent and predictable. To achieve this goal, all main mechanisms, procedures, and forms of activity should be appropriately regulated at the legislative level. In this regard, the experience gained from the relevant legislative regulation of the activities of state “regulators” and the functioning of self-regulatory organizations in related fields can serve as a basis for further institutional reform of the deposit guarantee system in Ukraine.

Оцінювання незалежності фонду гарантування вкладів фізичних осіб

According to the Key Principles of Effective Deposit Insurance Systems, an important guarantee of the proper functioning of deposit insurance is the independence of the deposit insurance body. The aim of the study is to develop a scientific and methodological approach to assessing the independence of the Deposit Guarantee Fund. The methods used in the study are the calculation of the composite indicator, the use of scores, analysis and synthesis. The publication formulates the criteria for the independence of the Natural Persons Deposits Guarantee Fund by its components: institutional independence – the term for which the managing director is appointed, the term for which the members of the administrative council are appointed, the requirements for the managing director when appointing to the position, the requirements for the members of the administrative council when appointing to the position, the procedure for appointing the managing director, the procedure for dismissing the managing director, the procedure for appointing members of the administrative council, the procedure for terminating the powers of the members of the administrative council, the conditions for the dismissal of the managing director, the conditions for terminating the powers of the members of the administrative council, the membership of directors in political parties, the ownership of corporate rights by managers; operational independence – regulation-making activities, judicial immunity of the Fund, requirements for avoiding conflicts of interest, prohibition to interfere in the activities of the Fund, international activities of the Fund, access to bank secrecy, administrative powers; financial independence – formation of internal organizational structure, sources of funding, budgeting, financial control procedure. In the context of improving the institutional independence of the Deposit Guarantee Fund, it is proposed to increase the term for which the managing director and members of the administrative board are appointed; to refer the issue of appointment and dismissal of the managing director of the Fund to the competence of the Verkhovna Rada of Ukraine on the proposal of the President of Ukraine; to regulate the membership of the Fund’s directors in political parties; to include independent members in the administrative board of the Fund. In order to strengthen operational independence, it is important to provide the Deposit Guarantee Fund with the right of legislative initiative, as well as access to bank secrecy. Improving the financial independence of the Deposit Guarantee Fund requires increasing the level of independence of financial control, as well as reducing the risk of non-repayment of the Fund’s debt to the State.

РЕГУЛЮВАННЯ БАНКІВСЬКОЇ ДІЯЛЬНОСТІ В УКРАЇНІ У КРИЗОВІ ПЕРІОДИ

In a market economy, banks have extremely large opportunities to influence economic processes, which necessitates the regulation of their activities. The need to regulate banking activities is especially acute during the period of crisis in the country's economy, as banking activities are characterized by a much larger set of risks, which leads to its increased financial vulnerability. The modern banking system of Ukraine has been operating in a full-scale war for more than two years, which increases the number of risks and threats to the banking sector in particular and the Ukrainian economy as a whole. An effective banking regulation system is key to the normal and stable functioning of the banking system in such conditions, as well as to a rapid post-war recovery. Despite the considerable number of works devoted to the study of various aspects of banking regulation in Ukraine in the context of the financial crisis, it should be noted that the new realities and challenges within which the banking system operates today necessitate further comprehensive research of approaches to regulating banking activities in times of crisis in the domestic financial market. The purpose of the article is to clarify the practical features of banking regulation in Ukraine in times of crisis, and also to identify the key areas for its improvement in the context of significant uncertainty and volatility of the environment. The article defines the purpose and role of banking regulation in Ukraine in times of crisis. The legal framework regulating the activities of banks is studied. The key changes made to the regulatory framework by the National Bank of Ukraine during the crisis period are characterized. Practical approaches to the regulation of banking activities in Ukraine are characterized based on the analysis of the main indicators characterizing the state of development of the banking sector in the context of crisis turning points in the history of the formation of our country, namely: during the global financial crisis of 2008–2009, the local financial crisis of 2014–2016, the economic crisis of 2020–2021 and the current crisis conditions. The article also identifies the peculiarities of banking regulation in Ukraine in times of crisis. It is emphasized that the functioning of the Deposit Guarantee Fund in Ukraine has a significant impact on the stability of the financial system due to its ability to neutralize shocks and/ or consequences of crises by preventing panic of depositors and rapid withdrawal of insolvent financial institutions from the market. The key directions for improving the regulation of banking activities in the current conditions of high uncertainty are substantiated.

СПОСОБИ ВРЕГУЛЮВАННЯ НЕПЛАТОСПРОМОЖНОСТІ БАНКІВ В УКРАЇНІ

It should be noted that the problems of liquidation and resolution of banking institutions and the regulatory framework for this process remain poorly researched. The domestic practice of resolving bank is not perfect and should be harmonized with the European practice. The purpose of the research is to systematize the main ways of resolving domestic banks. The author distinguishes the components of the resolution mechanism, the form and nature of which depend on the adopted rules of regulation in a particular country. The article analyzes the resolution instruments for domestic banks. The author focuses on their main points and features. It is noted that the method of liquidation with payouts is not related to the resolution, but it is the liquidation of a banking institution with all its consequences. It is emphasized that the resolution should be based on the principle of least cost for the DGF, which is the main state resolution authority. It is recognized that the resolution of banking institutions includes the sale of business or shares in the resolution regime, the establishment of a bridge bank, purchase and assumption, and liabilities conversion. The latter instrument can be implemented with financial support from the Deposit Guarantee Fund in the form of compensation for the assumed liabilities or in the form of a loan. The author emphasizes the differences between the methods of establishing a bridge bank and the transfering assets and liabilities. The possibility of establishing a bridge bank for a period of more than one year is noted. The use of the bridge bank resolution instrument (bridge bank) helps to preserve the banking business. Proposals for improving the resolution instruments in Ukraine have been formulated.

DEPOSIT OPERATIONS AS THE BASIS OF SUCCESSFUL BANKING: THEORETICAL ASPECT, REALITIES AND PROSPECTS OF DEVELOPMENT IN UKRAINE

The paper considers the peculiarities of Ukraine’s deposit market functioning in 2020–2023 under the influence of force majeure factors. The current state of the respective market was analysed in terms of types of deposits by duration, namely fixed and demand, by types of currencies in which funds are placed on deposits, by ranges of the size of the deposits themselves, etc. Approaches to the interpretation of the “deposit operation” concept were systematized. Having analysed the definitions it is possible to define a “deposit operation” as an operation involving the deposit institution’s attraction of funds (in national or foreign currency, in cash or non-cash form) or bank metals of depositors to deposit bank accounts under the terms of the concluded agreement and following the current legislation of Ukraine. A comprehensive analysis of the dynamics of the deposit portfolio of the banking system was carried out. The dynamics of deposits of individuals in the banking system of Ukraine were analysed. The dynamics of interest rates on deposit deposits in terms of subjects, currencies and duration are highlighted. The increase in deposit rates contributed to the recovery of the growth of fixed deposits of individuals which volume increased for the first time since the beginning of the war. The permission of the National Bank to buy foreign currency to open fixed currency deposits contributed to their growth in dollar equivalent. The peculiarities of the activity of the Deposit Guarantee Fund in Ukraine during the period of martial law were identified, and the impact on the level of public trust in banks was investigated. The obtained results of the conducted research made it possible to determine the main trends in the development of the deposit market of Ukraine and to outline proposals for improving the deposit policy of Ukrainian banks.

ASSESSMENT OF THE EFFECTIVENESS OF BANK RESOLUTION IN UKRAINE

For Ukraine, in the context of economic turbulence and uncertainty in the financial market, an important task is to find ways to prevent situations where losses from the liquidation of insolvent banks constitute a much larger share of the proceeds from the sale of assets of failed banks. In view of this, an important task is to transform the system of bank resolution, including the choice of resolution methods as opposed to liquidation, as well as to improve approaches within these procedures to the management and sale of assets of insolvent banks. As part of this approach, it is important to ensure that the resolution method is chosen to maximize the satisfaction of the bank’s creditors claims and to determine a fair and high-quality valuation of bank assets. The authority to resolve banks has been transferred to the Deposit Guarantee Fund, which is guided by the methods of bank resolution specified by law. However, most of the domestic insolvent banks were liquidated. Depositors, creditors, the banking system, and the DGF suffered significant economic losses, reputational risks, and a loss of confidence in banks and supervisory and resolution authorities. In order to avoid such negative consequences in the future, it is necessary to look for ways to resolve these issues today, in the martial law crisis conditions. The paper proposes an author’s methodology for assessing the effectiveness of bank resolution. The paper uses actual practical material to assess the effectiveness of procedures of the sale of assets of insolvent banks and for which no resolution methods have been applied. It is proved that not all assets can be sold at appraised value. Based on the results of comparing the appraised value of assets and the investor’s price (tender offer), it turns out that sometimes it is more expedient to accept an investor’s offer that is lower than the appraised value at the stage of an open tender than to sell such assets in the future at an even lower price than the investor’s price. In this case, the Fund, and thus the depositors, will suffer a loss of economic benefit.

Проблеми оцінки активів у процесі ліквідації банку

The aim of the article is to identify problematic issues of valuation of property (assets) of banks that are in the process of liquidation, and substantiate proposals for the desired solution, taking into account the need to protect the rights of bank creditors. Although the bankruptcy of banks causes significant economic and moral losses, the processes of removing insolvent banks from the market, their reorganization or liquidation are constantly taking place. Therefore, regulators and banks that have been declared insolvent face many questions, including the adequate valuation of banking assets and the determination of the liquidation estate. The article discusses approaches to asset valuation and features of their application in Ukrainian practice, as well as peculiarities of the sale of assets of banks in liquidation according to the Dutch auction model. It is noted that the imperfection of management of banks’ assets in the process of their functioning leads to discrepancies in the valuation of these low-quality assets in the liquidation procedure. It is determined that the ratio between the estimated value of assets and their book value for banks declared insolvent is on average 26.2 %, and the median value is 22.3 % This leads to a number of problems, including the inability of the Deposit Guarantee Fund (DGF) to ensure the repayment of part of the bank’s liabilities, which could be repaid in case of timely acceptance of tender offers at market value. It is noted that the most liquid assets, which are real estate and property, occupy an insignificant share in the structure of the liquidation mass – about 5 %, and the conversion rate in the sale of real estate quite often reaches 200 %. It is proposed, in accordance with European practice, to empower the Fund to monitor the assets of banks in the process of their functioning. The expediency of valuating assets not from the position of doing business «as usual» but from the point of view of the objective need to sell assets, focusing on the quick sale of assets at a market price, is emphasized. In order to improve the process of valuating the assets of an insolvent bank and focusing on the quick and transparent sale of the bank’s assets, it is proposed to implement the international experience of using loss-sharing agreements into domestic practice.

ІНСТИТУЦІЙНЕ ЗАБЕЗПЕЧЕННЯ ІННОВАЦІЙНОГО РОЗВИТКУ КРЕДИТНОГО РИНКУ

Institutional support for innovative development of the credit market is an important object of research, within the framework of which the search for effective methods, means and tools is carried out to improve the efficiency of its functioning. Analyzing the activities of the credit market, it can be noted that low efficiency of its work is largely determined by the imperfection of institutional support for the process of introducing innovative credit services.The purpose of the article is to study institutional support for innovative development of the credit market and determine their influence on the credit market development in Ukraine, which is necessary for understanding the interaction of credit market institutions, identifying factors that pro-mote or inhibit innovation and developing a strategy for creating a favorable innovation environment.Within the article, subjects of institutional support for innovative development of the credit market are studied. Considerable attention is paid to participants in the credit market in the field of innovative development, as well as to the regulatory legal acts that guide institutions in their methods of influence and regulation in the credit market, and functions of institutions are defined. Government institutions (the Na-tional Bank of Ukraine, Verkhovna Rada of Ukraine, Ministry of Finance of Ukraine, Ministry of Economy of Ukraine, National Securities and Stock Market Commission, Individual Deposit Guarantee Fund, Anti-monopoly Committee of Ukraine) were selected as subjects of institutional support for innovative develop-ment of the credit market. state institutions providing support for innovative activities (State Innovative Financial and Credit Institution), credit infrastructure institutions (banking and non-banking institutions, credit history bureaus, collection companies, rating agencies, credit brokers), fintech companies, educa-tional institutions (universities, scientific centers), innovative institutions (laboratories, technology parks, industrial parks, business incubators, technological hubs).The study of the influence of the above-mentioned subjects of institutional support for innovative development has become an important tool for understanding the interaction between government regulators of the credit market, credit institutions, educational institutions, innovative institutions, and fintech companies

THE DEPOSIT GUARANTEE FUND OF UKRAINE: TOWARDS EU STANDARDS OF RIGHTS PROTECTION

Abstract An effective deposit insurance system is commonly considered the strongest instrument for increasing confidence in banking systems, as well as for encouraging private investments in banking services. In developing relevant legislation and institutions in line with EU standards, Ukraine will ensure that its deposit guarantee system can be integrated with that of the EU. In light of the relevant legislation, we examine the EU’s deposit guarantee system in general and with regard to its particular characteristics, namely: insured entity, compensation amount, legal terminology, and financing. Then, we compare those characteristics to those of Ukraine and assess the necessity and priority of their development. As a result, we first emphasise that individual entrepreneurs and legal entities, as well as individual entities, must be insured under the Deposit Guarantee Fund. Second, we argue that the current state compensation amount for deposits in case of bank insolvency is insufficient and suggest that it must be revised and increased. Third, we draw attention to the fact that Ukrainian banking and deposit guarantee legislation must be revised and integrated with relevant European legal terminology. Finally, we also analysed the particular aspects of financing for the European deposit guarantee system, especially the various means of investing free funds in the deposit guarantee system, which we thought could be useful to implement in Ukraine. Our results suggest distinct legislative and other empirical measures needed to improve the Ukrainian deposit guarantee system and generally consolidate it with that of the EU. Background: The deposit insurance system provides insurance for the deposits of individuals who have entrusted their money to banks. In the event of the insolvency of a banking institution, the deposit insurance system, to a greater or lesser extent, guarantees the payment of deposits to that institution’s clients and protects the rights of other creditors involved in the insolvency proceedings. As a result of the banking sector crisis in Ukraine during 2014-2017, almost 100 banks were classified as insolvent. Therefore, the Deposit Guarantee Fund of individuals was subject to a huge burden, which exposed several problematic issues related to the protection of depositors’ rights. Methods: To obtain reliable and valid conclusions, the author used comparative and analytical methods of research. These methods consist of the analysis and comparison of the provisions of EU and Ukrainian legislation in the field of the protection of depositors’ rights. Results and Conclusions: The Ukrainian deposit guarantee system has significant differences from the relevant European system. First and foremost, this concerns the amount of guaranteed compensation for deposits in Ukraine. The author concludes that this deposit coverage amount was not reviewed during the period from 2012 to 2022, which does not contribute to the interest of depositors in keeping money in banking institutions. However, on 1 April 2022, during the period of martial law, Ukraine adopted Law No. 2180-IX ‘On Amendments to Certain Laws of Ukraine on Ensuring the Stability of the Deposit Guarantee System for Individuals’, which provides a full guarantee of individuals’ deposits during martial law and three months after its termination, as well as increases the guaranteed deposit compensation to UAH 600,000. These changes will have positive consequences for depositors, but the author points out that in the context of these legislative changes, the state should provide support to the Deposit Guarantee Fund by writing off interest arrears to the Ukrainian Ministry of Finance, which has emerged due to the banking crisis in 2014-2017. In addition, to preserve the liquidity of banks’ assets, the author proposes to ensure that the Fund starts preparing banks for the management of their assets by evaluating and monitoring their status. Furthermore, the author emphasises the need for the harmonisation of the Ukrainian banking legislation with the requirements of Directives 2014/49/EU and 2014/59/EU. For this purpose, the guaranteed amount of reimbursement should be gradually increased to the equivalent of EUR 100,000, and guarantees should be extended to depositors who are legal entities. The relevant legislation must also be amended so that its terminology corresponds with that of the EU, the Deposit Guarantee Fund participants must be included in other credit institutions, and the Deposit Guarantee Fund must guarantee legal entities’ deposits.

West African Economic and Monetary Union

The institutional and legal frameworks for financial stability in the West African Economic and Monetary Union (WAEMU) have seen significant progress since the previous Financial Sector Assessment Program (FSAP) in 2008. 1 The institutional reform of the WAEMU and the Central Bank of West African States (BCEAO) in 2010 clarified the respective mandates and responsibilities of the latter and the WAEMU Banking Commission (CBU), and it strengthened the CBU’s legal autonomy and enforcement powers. A new banking law adopted in 2010 established an overall framework for the operation and supervision of banking activities, which has been rendered more proactive and risk based with the gradual implementation of the Basel II/III mechanism initiated in 2016. A bank resolution regime was introduced in 2015 and the mandate of the deposit guarantee fund, created in 2014, was expanded to bank resolution funding in 2018. A macroprudential policy framework, including for monitoring systemic financial sector risks, was developed around the BCEAO and the Financial Stability Committee (CSF-UMOA) in 2010. This series of reforms has greatly enhanced the robustness of the financial safety net via its four components: the early intervention mechanism, the bank resolution regime, the deposit insurance system, and the emergency liquidity assistance (ELA) mechanism.

Financial system of Ukraine during the martial law

The paper is a study of the functioning of the financial system of Ukraine under martial law. In particular, it was found that the structure of the financial system is quite complex, and with the help of the financial system, the state accumulates and uses resources to maintain its apparatus. It was found that in accordance with the Decree of the President of Ukraine of February 24, 2022, a martial law regime was imposed on the territory of Ukraine for 30 days and later it was extended. With the beginning of a large-scale invasion of the aggressor country, the National Bank of Ukraine adopted the necessary decisions, including the NBU resolution of February 24, 2022 №18. It was determined that these actions are important in order to ensure the reliable and stable functioning of the financial system of the country, as well as to ensure the activities of the Armed Forces of Ukraine and the smooth operation of critical infrastructure. It was found that on April 13, 2022, the Law of Ukraine №2180-IX "On Amendments to Certain Laws of Ukraine on Ensuring the Stability of the Deposit Guarantee System for Individuals" came into force, which introduces a 100% guarantee on bank deposits of individuals and sole proprietors. It is investigated that in case of liquidation of the bank, the state on whose behalf the Individual Deposit Guarantee Fund (DGF) acts, reimburses depositors within the guaranteed amount. It was determined that the NBU Council approved the "Basic Principles of Monetary Policy for Martial Law". This is a very important document, which not only opens up new opportunities for the implementation of relevant measures of the NBU, but also creates opportunities to create appropriate conditions for postwar reconstruction. In addition, it was found that a number of changes were made to the budget legislation, which was adopted during the martial law. In particular, changes were made in the functioning of local budgets under martial law. Thanks to the Office of the President of Ukraine, the Government, the Verkhovna Rada of Ukraine and other central authorities, a number of quick, effective and prompt decisions were made.

СУЧАСНА ДЕПОЗИТНА ПОЛІТИКА БАНКІВ УКРАЇНИ ЯК СКЛАДОВА СИСТЕМИ УПРАВЛІННЯ ПАСИВАМИ

The resilience of the banking system during the war is largely determined by the availability of sufficient sources of funding – own, attracted and borrowed. One such source is bank deposits. The deposit policy of commercial banks in Ukraine has changed significantly in recent years, and banks today have ceased to depend on deposit sources, due to sufficient liquidity of banks due to cheap funds raised from the NBU as refinancing. The main differences in the deposit policy of banks in 2014–2019 and in 2020–2022 are summarized. There is a steady increase in deposits even in times of war, and demand deposits significantly outweigh time deposits, which is due to the desire of customers to have free access to their funds in conditions of uncertainty in the future. The general tendency to increase the deposit portfolio of banks is due to the restoration of confidence in the banking system, as well as the existence of the Deposit Guarantee Fund, which during martial law and three months after its termination will provide full compensation to depositors. Since 2020, we have seen a significant reduction in the level of deposit rates, which today don’t cover inflation. In addition, banks today have no economic reason to raise deposit rates, as the real economy has not had enough facilities to increase lending due to the crisis, the COVID-19 pandemic and especially the war. As an object for investment, deposits today compete with IGLBs, which have higher yields and are not taxed. Today, the main problems associated with attracting deposits in Ukraine are: uncertainty about the future, falling incomes, reduction of interest rates on bank deposits, high level of interest income taxation, significant amounts of cash in circulation, etc. Modernization of banks’ deposit policy should be based on constant analysis of the deposit market, adaptation to the conditions of its operation and the formation of adequate interest rates by banks in order to further invest in the real economy.

The boundaries of the normative regulation of the system of guaranteeing deposits of individuals

The purpose of the work is to determine the boundaries of regulatory regulation of the deposit guarantee system of individuals, the prospects for their changes, as well as the feasibility of the powers of the Fund. This legal consolidation allows us to conclude that the Fund is not a property management body (in particular, cash), so the existence of power to regulate public relations within the guarantee system is unjustified, because it has functions, not authority, is an institution, and not a body that manages property (in particular, like a state enterprise in terms of economic management – Part 1 of Article 74 of the Economic Code of Ukraine), and does not implement public policy. So, the Fund actually combines in one person the function of accumulation and management of funds, as well as regulates the activities of banks in relation to these relations. This approach is contrary to Directive 2014/49/EU, which distinguishes between such institutions. In this respect, it should be noted that this Directive 2014/49/EU is an important tool for achieving the internal market in terms of both freedom of establishment and freedom to provide financial services in the field of credit institutions, while increasing the stability of the banking system and depositors (p. 3 of Preamble). That is, it is a search for economic rather than administrative mechanisms for the existence of the system. There are considerations about the limits of regulatory powers by the Fund, because in fact it is a structural regulation of the relationship of guaranteeing deposits of individuals. Moreover, given the functions of the Fund, defined in Art. 4 of the Law № 4452, the regulation of the participation of banks in the system of guaranteeing deposits of individuals is only a small component in the activities of this institution. Moreover, Law № 4452 additionally contains a section devoted to the regulatory activities of the Fund. Without detailing the rules of this section, we should focus only on its hall provisions. Thus, according to Part 1 of Art. 30 of the Law № 4452 The Fund regulates the activities of banks by: 1) adoption, within the limits of its powers, of normative legal acts obligatory for execution by banks; 2) exercising control over the fulfillment of banks ’obligations in connection with their participation in the deposit guarantee system for individuals; 3) withdrawal of insolvent banks from the market; 4) in other forms provided by this Law. Summarized that the trend of development of deposit guarantee relations is to strengthen the administrative influence of the Fund on the system, as well as giving this institution power in terms of regulation, which does not meet modern world trends. Under such conditions, the Fund can only have an economic impact on the deposit guarantee system, in particular in terms of proper preservation and accumulation of funds, while regulatory regulation should be concentrated exclusively within the powers of the National Bank of Ukraine. Key words: normative regulation, deposit guarantee fund, economic regulation, deposit guarantee system of individuals, administrative regulation, normative-legal regulation.

QUALITATIVE INDICATORS OF BANK PERFORMANCE ASSESSMENT FOR THE PURPOSES OF PARTICIPATION IN THE DEPOSIT GUARANTEE SYSTEM IN UKRAINE

One of the directions of reforming the system of deposit insurance in the world is risk-oriented approach, which means that the degree of involvement in the system is determined by the degree of exposure of the participant’s operations to risk. Correct estimation of the degree of risk of banking operations requires a well-grounded approach to the study of indicators-criteria that should be clear, understandable, and objective. The subject of research is the performance of the deposit guarantee system in Ukraine. Therefore, the present research aims to solve applied problems of establishing the content of qualitative indicators of banking operations that arise in their application for the sake of determining the degree of risk in the operations of the participant of the Deposit Guarantee Fund in the estimation of the amount of recurring charges. Methodology. Systemic method was applied to establish the content and assign qualitative indicators of bank performance for establishing their actual content in accordance with the regulation. On this basis, using a formal logical method, definitions of legal notions were formulated with due account of the financial and economic meaning as well as the established goal of legal regulation. Formal dogmatic approach allowed to make an analysis of the regulatory and legal framework of the state, to identify functional capacity of the system of protection of the rights and interests of bank depositors, their technical and legal excellence. Also, a number of other general scientific methods of research were applied, in particular: analysis (to study systemic application of the notions), historical legal (to study the establishment, change and development of the deposit guarantee system), comparative legal (to study the legislation determining specific principles of the functioning of the deposit guarantee system of natural persons in foreign states) etc. As the result, there has been established the essence of the current qualitative indicators used in the determination of the degree of risk of banking operations in Ukraine as far as application of the means of influence for violation of banking legislation by the National Bank of Ukraine to participating banks over the reporting period, as well as administrative and economic sanctions applied for violation of legislative requirements related to the deposit guarantee system of natural persons are concerned. Also, proposals have been developed concerning the procedure of their application for the sake of increasing the opportunities for ensuring risk-oriented approach.

Deposit insurance system as a guarantee of depositor’s protection

The article examines the state and trends in the development of the deposit guarantee system for individuals in Ukraine. The challenges and needs of improving the mechanism of centralized insurance protection of depositors are identified. The authors emphasize the growing role of the Deposit Guarantee Fund of individuals in the banking market and expanding the scope of its modern mechanisms to reduce the negative effects of bank bankruptcy, which is an important factor in ensuring the stability of the banking system. Emphasis is placed on considering the disposable income of domestic households, as this indicator is an eloquent indicator of improving the country’s economic well-being. Parallels were made in the analysis of quantitative indicators of state social guarantees, namely: the expression of the living wage and the amount of the minimum wage for 2016-2020. The size of the household savings growing is estimated. The importance of converting household savings into investments for economic development is determined and the number of deposits and the value of deposits for households in 2016-2020 are analyzed. The authors also illustrate the dynamics of changes in the UIRD indicator. The deposit guarantee system is presented as an important factor in the financial stability of the state economy. The article emphasizes the successful steps of legislative regulation of the subject composition of the Deposit Guarantee Fund of Ukraine and reformation of compensation limits, which brings the domestic insurance field closer to European standards of depositor’s protection. According to the results of attracting deposits from the top-9 commercial banks of Ukraine, tables have been formed, the data in which allow making conclusions about the leaders of the deposit services market and the amount of potential reimbursement. Proposals have been formulated to improve the deposit guarantee system, aimed at optimizing insurance schemes and relations in accordance with the threats to financial security as an objective phenomenon of a market economy and the conditions of globalization.

НАПРЯМИ УДОСКОНАЛЕННЯ ДІЯЛЬНОСТІ ФОНДУ ГАРАНТУВАННЯ ВКЛАДІВ ФІЗИЧНИХ ОСІБ: ЕКОНОМІКО-ПРАВОВИЙ АСПЕКТ

Досліджено особливості діяльності Фонду гарантування вкладів фізичних осіб у системі гарантування вкладів фізичних осіб.
 Проаналізовано повноваження Фонду гарантування вкладів фізичних осіб. Визначено, що його виконавча дирекція здійснює повноваження у сфері забезпечення діяльності Фонду, щодо джерел формування коштів Фонду, у сфері забезпечення відшкодувань за вкладами, у сфері регуляторної діяльності, у сфері виведення неплатоспроможних банків з ринку. Запропоновано повноваження адміністративної ради Фонду гарантування вкладів фізичних осіб поділити на функціональні, погоджувальні і розпорядчі.
 З’ясовано проблеми формування ресурсної бази Фонду гарантування вкладів фізичних осіб. Наголошено, що розширення джерел формування коштів Фонду безпосередньо пов’язано з колом учасників системи гарантування вкладів фізичних осіб. З метою збільшення коштів Фонду гарантування вкладів фізичних осіб запропоновано включити до складу учасників Фонду небанківські фінансові установи.
 Розглянуто окремі аспекти контролю за діяльністю Фонду гарантування вкладів фізичних осіб. Наголошено, що річний звіт Фонду потребує вдосконалення. Запропоновано закріпити форму річного звіту Фонду в законодавстві та визначити такі його розділи: основні показники діяльності Фонду у звітному періоді, внутрішнє управління Фонду, законодавство та регуляторна діяльність, інформування громадськості, аналіз банківського сектору, регулятивна діяльність Фонду, управління фінансами, виведення неплатоспроможних банків з ринку, захист інтересів вкладників, фінансова звітність Фонду.
 Сформульовано напрямами удосконалення діяльності Фонду, а саме: перегляд повноважень Фонду в частині здійснення контролю за проблемними банками, розширення кола суб’єктів та об’єктів системи гарантування вкладів, удосконалення контролю за діяльністю Фонду, запровадження нових механізмів здійснення виплат відшкодування вкладникам неплатоспроможних банків, розширення переліку джерел формування коштів Фонду.

Ліквідація неплатоспроможного банку за участю інвестора: організація, процедури, переваги

The article is aimed at systematizing and identifying the features, advantages and disadvantages of various ways of withdrawing insolvent banks from the market, as well as studying the consequences of their implementation in domestic practice. Liquidation of a bank with reimbursement of all funds on deposits of individuals by the Deposit Guarantee Fund (DGF) is simple and affordable, but the most expensive and inefficient way. It is noted that at present the Fund has liquidated more than 50 banks, now the process of liquidation of 48 more banks is continuing. The most promising are two methods that are implemented with the participation of the investor through the tender procedure. This is the creation of a transitional bank with the subsequent selling to the investor and the selling of the bank as an integral unit to the investor. The implementation of these methods involves the search for an investor and the receipt of investment resources, which always appears positive. Therefore, the article describes in detail the specifics of these restorative, or sanitation, methods of withdrawal of an insolvent bank, analyzes their advantages and weaknesses. Organizational procedures for the application of these methods of withdrawal of insolvent banks from the market are generalized and structured. It was emphasized that in the process of withdrawing an insolvent bank from the market due to the selling, the financial burden on the DGF is decreasing. The Fund does not reimburse the funds of individual depositors, since all obligations under guaranteed deposits are transferred to either the transitional bank or the new owner of the bank in full. It is substantiated that these methods require modernization, updating and a closer definition of the relevant organizational and procedural components. This will increase the efficiency of approaches for further use, and most importantly, for preventing the eventual adverse consequences.

Сфера гарантування вкладів фізичних осіб як об’єкт адміністративно-правового реглуювання

Soloviova N. А. Field guarantee of deposits ofindividuals as an object of administrative and legalregulation. – Article.The article reveals the connection of the depositguarantee system of individuals with the banking systemand determines their relationship. Attention is drawn tothe fact that both are relatively separate elements of thefinancial system of the state, have in common a complexnature of the legal nature of relations and provide acombination of elements of both private and public law.Taking into account a certain subsystemic nature of thedomestic system of guaranteeing deposits of individualsin relation the banking system of Ukraine, a visionis formulated on the distinction between private lawand public elements of legal relations in both areas. Onthe basis of theoretical generalization and comparativeanalysis, the elements that provide the main functionsof the deposit guarantee system of individuals andrequire an administrative and legal method of legalregulation are identified. An approach the allocation ofadministrative legal relations within the banking sphere,which are available in the field of guaranteeing deposits ofindividuals and are inherent only in it, is formulated. Theauthor's approach definition of object of administrativeand legal regulation of sphere of guarantee of deposits ofphysical persons, its delimitation from a subject is offered.The purpose of the study is analyze the scope ofguaranteeing the deposits of individuals as an objectof administrative and legal regulation, determinethe approach its separation from the subject of legalregulation and its significance.It is concluded that the administrative legal relations toensure the effective functioning of the deposit guaranteesystem of individuals is the object of administrative andlegal regulation in this area. According their content,the norms of administrative law regulate public relationsregarding the implementation of the Fund's DepositGuarantee Fund's powers regulate, supervise and controlthe activities of banks participating in the Fund, withdrawinsolvent banks from the market and liquidate them in casesestablished by the Law of Ukraine On System guaranteeingthe deposits of individuals to ensure the effectiveness ofits operation. This approach provides for stability in thefield of guaranteeing deposits of individuals, stimulatingbanking activities and protecting the interests of depositorsin removing insolvent banks from the market and theirliquidation, precisely because of the administrative and legalregulatory impact on this area by the Deposit GuaranteeFund as an independent special state institution

The place of the NBU in the mechanism of protection of the rights of depositors of commercial banks

The article highlights the problematic issues of implementing the right to protection of depositors of commercial banks, which have been liquidated recently. Fulfillment by banks of obligations to return deposits of individuals is studied comprehensively, taking into account the doctrinal provisions of civil, administrative, economic and banking law. Certain provisions of civil legislation are analyzed when interpreting the content of duties of a commercial bank, under the contract of bank deposit and responsibility of a bank for non-fulfillment of obligations assumed under the deposit contract. The public-legal status of the Central Bank of Ukraine and possibilities of bringing it to responsibility are studied in the light of the latest achievements of administrative and legal science. The article examines different scientific and theoretical legal positions concerning the qualification of actions or negligence of the National Bank of Ukraine. The proposal to hold the central bank liable for inaction and failure to take timely preventive measures to commercial banks, which were subsequently liquidated as insolvent, is formulated. The article provides an overview of the materials of judicial practice and legal position of the Supreme Court of Ukraine, which allowed to state the ambiguity and inconsistency of judicial decisions. As a result of the study the main causes of massive violations of the rights of depositors of liquidated commercial banks, to which the author attributes: the improper implementation of preventive, control and supervision functions of the National Bank of Ukraine; lack of financial resources in the Deposit Guarantee Fund of individuals. Improvement of national legislation, harmonizing it with European standards of banking services will contribute to the protection of the rights and legitimate interests of depositors of commercial banks.