Kosenco U. G.

Romanenko T. L.

Donetsk National University Economy and Trade Named by M. I. Tugan-Baranovsky

Foreign funds in bank system of Ukraine: problems and ways of their decision

The geographical expantion and consolidation of the banks have crossed the borders of separate countries and have covered the whole world. The Banks become the powerful financial conglomerates, which are a new type of transformed, focused and regenerated universal banks. Neither Ukraine, nor its financial-bank system taking into account the openness of the domestic economy could avoid these processes of globalisation of world economy.

  Recently, in the context of the entering the Ukraine WTO the presence of the foreign bank capital in Ukraine is gaining greater urgency. Among politicians and scientists the debates are going on concerning advantages and disadvantages of the expansion of such presence. The sides of these debates often have opposite positions: one side approves the prospects of the increase of foreign funds in Ukrainian bank sector, the other one defends the interests of the Ukrainian banks, espousing hard restriction of the presence of the foreign bank capital in Ukraine. However, it is necessary to analyze this problem deeper especially right now when Verkhovna Rada ratified entering WTO.

The First representation of the foreign banks came up for Ukraine at the beginning of 1990th.

The Presence of the banks with foreign funds in bank system of the Ukraine answers the interest of the development of the national financial system, promotes attraction of foreign investments and expansion of resource basis of social-economic development. At the same time there are serious financial and economic risks of the quick growing of the share of the foreign bank capital, connected with possible loss of the sovereignty in the sphere of money-credit policy, possible reinforcement of instability, unexpected fluctuations of liquidity of the banks, speculative changes of supply and demand on money-credit market, possible withdrawal of financial resources. So making a decision of the forms and scale of the expansion of the presence of the foreign bank capital on the Ukrainian market must be subordinated to social-economic development, increasing national competitiveness, economic safety, fortifications of money-credit system of Ukraine.

During 2007 the number of banks with foreign funds continued to increase. According to NBU, on May, 1, 2007 share of foreign funds in general was 29,3%; on January, 1, - 27,6%. The number of banks with 100-percent of foreign funds did not change. But at the  beginning of year increased from 13 to 18 (among 173 acting banks). Thereby, foreign funds occupys more significant place in banking system of Ukraine.

But at the same time we cannot consider foreign bank capital the same as domestic, but a little more efficient and more civilized, and the one problem is its further attraction. The main reason of entering foreign banks the Ukrainian bank system became first of all undevelopment of its own bank sector that means the high potential for the growing, and, secondly, neighborhood with Eurounion.

Among the main foreign investors that invest the facilities in banks of Eastern and Central Europe are average regional European banks: such as Belgium KVS, Austrian Bank Austria, Erste and Raiffeisen, Italian UniCredito and BCI Intesa, French Societe Generale, German Commerzbank and Dresdner Bank. Last years attempts to become regional was made some by Greek banks: Alpha Bank, National Bank of Greece, Piraeus Bank, however their expantion is limited by the frame of the Balkan region (Bulgaria, Rumyniya, Makedoniya, Albania).

Practicability of the further growing presence of foreign funds in bank system of the country is conditioned objective needs:

- following monetization of the economy and absorptions of the additional money mass by bank system;

- increasing level of lending the economy as premiseses of necessary structured shifts;

- quick development of financial market;

- direct use of modern bank technologies and experience of bank management as premiseses of further institulisation of national financial system;

- increasing to competitiveness and operated integrations in global economic space.

It is important that attraction of foreign funds will promote the reduction to corruption, legalization of salary and corresponding increase the social deductions, increasing standard ensure contribution.

At the same time attraction of foreign funds carries serious problems not only for bank system, but also for domestic economy and economic safety of the state as a whole. Among these problems we can choose the most serious ones:

1. Structured risks of "dependent development" because of this of the whole complex of economic, social and political problems. Formal and informal criteria and purposes banks activity with foreign funds can not coinside with national purpose of social-economic development. Structured backwardness and institutional a weakness of the economy of Ukraine makes impossible the possibility of deformed development quite seal.

2. Threat of whole globalisation of the national economic system and loss of the economic sovereignty. In conditions of growing of global instability and conflict ability with unpredictable consequences this scenario, is extremely undesirable.

3. Threats for economic safety of the country through possible uncontrolled with drow capital of and financial resources. The Initial influx of foreign funds in the forms of opening branches and particularly – acquisition of nonresidents of a part or the whole authorized capital of the domestic banks in time can lead to serious withdraw o resources out of country and removing incomes abroad.

The main trends to optimization of the tolerance of the foreign bank capital must be:

First, increasing the share of foreign bank capital in bank system must occur gradually - in accordance with making the favorable internal conditions of the development of the bank sector and increasing competitiveness of the national bank capital.

Second, remember about fortification and the following development of the segment of the banks with state capital, which specialize on provision strategic social, structured and foreign economic tasks of the economic growth (Sberbank, Eksimbank, Bank of Reconstructions and Developments).

Third, one should introduce normative-organizing selection and monitoring of access of the foreign bank capital on the basis of national priority developments; introduce the prohibition on access of the banks from offshore zones.

Fourth, clearly normalize selling the banks with national capital to foreign owners.

The Realization of such actions give the opportunity to neutralize or at least once minimize the negative consequences of the increase of the share of foreign funds in bank system of Ukraine, as well as use the advantages of such presence for the next realignment of national economy, fortification of money-credit market and financial system in general.