Transcript The Ukraine and the United Kingdom’s response to the

Regulatory framework in
emerging markets: outlining
the crises impact
Prof. Iryna D’yakonova, Ukrainian Academy
of Banking, Ukraine
&
Tatiana Scherbina, Ukrainian Academy of
Banking, Ukraine
Aims
• Investigating the affects of the economic
crisis (2007)on Banking Supervision in
developing countries
• Identifying specific features in Ukrainian
regulative framework
Banking Supervision Systems in
EU’s countries
Country
Model
Task-oriented
Sectoral
Austria
Belgium
Greece
Denmark
Estonia
Ireland
Spain
Italy
Cyprus
Latvia
Lithuania
Mega-regulator
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Banking Supervision Systems in
EU’s countries
Country
Model
Task-oriented
Sectoral
Luxemburg
Malta
Germany
Netherlands
United Kingdom
Poland
Portugal
Slovakia
Slovenia
Hungary
Finland
France
Czech Republic
Swiss
Bulgaria
Romania
Mega-regulator
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The Financial Architecture in some
countries according to the structure
index
Place
Bank-oriented architecture
Market-oriented architecture
Developed countries
Bank-oriented architecture
Market-oriented architecture
Developing countries
1
Panama
Netherlands
Bangladesh
Denmark
2
Tunis
Thailand
Nepal
Peru
3
Cyprus
Canada
Egypt
Chile
4
Portugal
Australia
Costa Rica
Jamaica
5
Austria
Republic of South Africa
Barbados
Brazil
6
Belgium
South Korea
Honduras
Mexico
7
Italy
Swiss
Trinidad and Tobago
Philippines
8
Finland
Great Britain
Mauritius
Turkey
9
Norway
Singapore
Kenya
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10
New Zealand
USA
Ecuador
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The Capital Structure of Banking
System, 2004
Foreign owned banks
10%
Ukrainian banks
90%
Main indicators of banks activity in groups
according to source of capital origin as on
01.07.2010 (bil. UA)
№
1
2
3
3.1
Criterion
which includes:
Ukrainian
banks
State
owned
banks
Private
owned banks
Banks with
western
capital
Banks with
Russian
capital
Total
Number of banks in group
115
5
110
39
10
164
Total Assets
431,11
152,69
278,42
367,59
78,62
877,31
Group ratio, %
49,14
17,40
31,74
41,90
8,96
100,00
Net worth
77,60
38,13
39,47
38,25
9,71
125,56
Group ratio, %
61,81
30,37
31,44
30,46
7,73
100,00
Loan portfolio
312,32
106,48
205,84
295,46
63,34
671,12
Group ratio, %
46,54
15,87
30,67
44,03
9,44
100,00
including consumer loans
55,58
11,14
44,44
135,20
8,68
199,47
Group ratio, %
27,86
5,58
22,28
67,78
4,35
100,00
Growth of banks external debt
(bil. USA)
45
39
40
35
31
30
25
20
13,9
15
10
6,2
5
1,7
2,6
-
01.01.2004
01.01.2005
01.01.2006
01.01.2007
01.01.2008
01.01.2009
Structure of loans
Population
16%
by the end of 2008
Population
39%
Non-financial
corporations84%
by the end of 2004
61%
Non-financial corporations
Bank loans according to source of
capital origin
bil. hrn
400
368,3
350
321,3
301,1
307,4
312,3
300
295,5
250
206,7
199,6
200
147,4
150
99,4
89,7
100
62,6
61,2
50
15,2
1,1
63,3
39,2
27,1
2,1
4,2
17,6
0
2004
2005
2006
2007
2008
2009
І- banks with Ukrainan sourse of capital origin
ІІ - banks with western sourse of capital origin
ІІІ - banks with Russian sourse of capital origin
І півр.2010
Background for the crisis:
- total dollarisation of the economy;
- increase in the share of foreign capital in the banking system
to 40%;
- foreign currency loans;
- inadequate growth in consumer lending (over 100% per year),
mostly in foreign currency;
- insufficient crediting at reasonable interest rates of the real
economy;
- excessive external debt of corporate and banking sectors,
which exceeded the external debt of the state almost in twice;
- artificial strengthening of hryvnia to U.S. dollar in the summer
of 2008;
- negative trade balance.
Ukraine banking structure pre and
post economic crisis
• The world crisis in Ukraine started in
financial sector and then spread through
the rest of the economy.
• Flight of deposits and high level of
corporate debts caused to the lack of
liquidity in Banking system
• Exchange devaluation followed by inability
to provide stable servicing the loans.
Banking regulation in Ukraine pre-crisis
• The banking system of Ukraine consists of the National
Bank of Ukraine (NBU) and other domestic banks and
subsidiaries of foreign banks operating in Ukraine
• The banking system enjoys a strategic position in the
economy, which is explained by its major functions such
as:
 securing the stability of the national currency;
 accumulation and redistribution of
financial resources of the general population
and companies into credits and investments;
 regulation of supply and demand of money
in the economy;
 organization and harmonization of payments
in the economy.
Board of directors on banking regulation and
supervision structure till 2008
Board of directors on banking regulation and supervision
Department of banks’
registration and
licensing
Department of banking
regulation and supervision
Department of banking activity
expiration
Department of banking
methodology regulation and
supervision
Department on the matters of
banking system usage for the
legalization of criminal income and
terrorism financing
Organizational structure of banking regulation and
supervision of the Central Office (Bodies) of the
National Bank of Ukraine as at 12.03.2011
General department of
banking supervision
Banks registration, licensing
and reorganization
department
Financial Monitoring
department
Deputy Head of the NBU
The regulatory and
methodological support for
banking regulation and supervision department
Foreign exchange transactions control,
methodology and licensing department
Legislative changes
• requirements to the commercial banks in
the field of banking activity regulation
• determining the order of state participation
in banks capitalization
• complex of measures for providing stability
of the banking system in a period of
financial crisis
Deposit protection scheme
• The Deposit Guaranty Fund is created for
protecting the rights of individual
depositors (natural persons) in 1998
• The participants are domestic commercial
banks and the branches of
foreign/international banks in Ukraine
Changes in deposit protection
• the size of compensation is increased from
50 000,0 to 150 000,0 of hryvnyas
• NBU pays annual contributions to Deposit
Guaranty Fund
• the Fund has an ability to be credited by
NBU on refinancing interest rate terms
Key questions in Baking
Supervision:
• Lack of independence
– institutional
– operational
– financial independence
• Regulatory structure
– Ukraine – without considerable changes after
crisis
– What framework is better?