RISK REGULATION OF BANKING ACTIVITIES WITH DERIVATIVE FINANCIAL INSTRUMENTS: A COMPARATIVE ASPECT
DOI:
https://doi.org/10.32070/ec.v1i45.74Keywords:
banking regulation, credit derivatives, financial instruments, risk management, Basel recommendationsAbstract
The global financial crisis of 2007-2009 demonstrated a new threat source to the global financial system – the rapid expansion of the derivatives market, which volume (80 trillion dollars in 2008) exceeded global GDP. Generating cause for serious concern, derivatives contradicted their economic nature as a tool for hedging and risk avoidance in the financial market. This fact called into question the very necessity of credit derivatives existence, since they have partially claimed responsibility for the bankruptcy of the largest financial institutions.
Lack of control mechanism (from professional organizations or state one) for the issuance and circulation of such financial instruments, an increase in the OTC derivatives market, as well as the absence of effective regulating methods for banking activities related to the bank capital release with the reinvestment purposes – all these factors caused the unrestricted growth of derivatives market. In this regard, our research related to modern methods of banking regulation for risk reduction is one of the most relevant nowadays.
The effective banking system functioning is a prerequisite for the development of market relations in Ukraine that makes banking regulation and supervision important and necessary elements in maintaining stability of the banking system and economy as a whole. This article examines the operating techniques for regulating commercial banks activities in Ukraine and in European practice, following the example of the Czech Republic.
The issues of adaptation and implementation the European experience in order to reduce the level of various banking risks, considering the peculiarities of the Ukrainian economy, is a perspective direction for the research in the field of banking regulation.
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