RISK REGULATION OF BANKING ACTIVITIES WITH DERIVATIVE FINANCIAL INSTRUMENTS: A COMPARATIVE ASPECT
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.
Basel Committee on Banking Supervision. (2010). Basel III: International framework for liquidity risk measurement, standards and monitoring. – Bank for International Settlements [PDF file]. Retrieved from: http://www.bis.org/publ/bcbs188.pdf.
Bodnar, T. V., Reznikova, V. V., Patsuriia, N. B., Radzyviliuk, V. V., & Kravets, I. M. (2019). Accounting and financial reporting of economic entities: adaptation of Ukrainian legislation to the standards of the European Union. Law and Financial Markets Review, 1-7. Retrieved from: https://doi.org/10.1080/17521440.2019.1612629.
Czech National Bank. (2019). Financial Stability Report 2018/2019 [PDF file]. Retrieved from: https://www.cnb.cz/export/sites/cnb/en/financial-stability/.galleries/fs_reports/fsr_2018-2019/fsr_2018-2019_chapter_5.pdf.
Fabozzi, F. J., Modigliani, F. P., & Jones, F. J. (2009). Foundations of financial markets and institutions (4th ed.). (Eds.). New York, NY: Prentice Hall.
Gorbunova, O. A., Ignatova, O. V., & Tereshina, O. Y. (2018). World market of credit derivatives: problems of development and regulation. Journal of Reviews on Global Economics, 7, 608-617.
Hlibko, S. V., Vnukova, N. N., Hontar, D. D., Anisimova, H. V., & Liubchych, A. N. (2019). Risk oriented approach to determining bank’s capital size according to requirements of Basel Committee on Banking Supervision. Economic Studies, 28(1), 56-71.
Konovalova, N. (2018). The impact of Basel III on the banking system and economic development in Eastern European countries. Journal of Business Management, 16, 15-33. Retrieved from: https://doi.org/10.32025/RIS18003.
Mejstrik, M., Pecena, M., & Teply, P. (2015). Bankovnictvi v teorii a praxi/Banking in Theory and Practice. Charles University in Prague, Karolinum Press.
National Bank of Ukraine. (2015). On Approval of Amendments to the Instruction on the Procedure for Regulating the Activities of Banks in Ukraine: Resolution of the Board of the National Bank of Ukraine dated May 12, 2015 № 312. Retrieved from http:// zakon2.rada.gov.ua/laws/show/v0312500-15.
National Bank of Ukraine. (2015). The National Bank of Ukraine announces introduction of new bank capital requirements as well as specific requirements to systemically important banks. Retrieved from https://bank.gov.ua/control/en/publish/printable_article?art_id=17537282&showTitle=true.
National Bank of Ukraine. (2016). On the Regulation for Measuring Credit Risk Generated by Banks' Asset Operations: Resolution No. 351 of NBU. Retrieved from https:// zakon.rada.gov.ua/laws/show/v0351500-16/paran57.
National Bank of Ukraine. (2018). On the introduction of the liquidity coverage ratio (LCR): Resolution of the Board of the National Bank of Ukraine dated February 15, 2018, № 13. Retrieved from https://zakon.rada.gov.ua/laws/show/v0013500-18#n6.
Novak, O., Osadcha, T., & Petruk, O. (2019). Concept and сclassification of derivative financial instruments as a methodological precision on their regulation in the financial services market. Baltic Journal of Economic Studies, 5(3), 135-144. Retrieved from: https://doi.org/10.30525/2256-0742/2019-5-3-135-144.
Novotny-Farkas, Z. (2016). The interaction of the IFRS 9 expected loss approach with supervisory rules and implications for financial stability. Accounting in Europe, 13(2), 197-227. Retrieved from: https://doi.org/10.1080/17449480.2016.1210180.
Poledna, S., Molina-Borboa, J. L., Martínez-Jaramillo, S., Van Der Leij, M., & Thurner, S. (2015). The multi-layer network nature of systemic risk and its implications for the costs of financial crises. Journal of Financial Stability, 20, 70-81. Retrieved from: https://doi.org/10.1016/j.jfs.2015.08.001.