Ivanova L. G.

Scientific supervisor: senior teacher Yerysh L.

Donetsk National University of Economics and trade

Named after M. Tugan-Baranovsky

 

THE INFLUENCE OF FOREIGN CAPITAL ON THE BANKING SYSTEM OF UKRAINE

 

Considering the impact of foreign capital into the Ukrainian banking system and the economy of Ukraine the clear answer about the benefits or harm of participation of foreign participants in the conduct banking business in Ukraine can not be given. In view of the global trend of financial globalization it is almost impossible to avoid penetration of foreign investments into the country, the exception is the application of strict government restrictions.

The aim of the article is to study the influence of foreign capital into the domestic banking system and the identification of possible threats to the presence of foreign banks in Ukraine.

The study of theoretical and practical issues of influence of foreign capital to the banking sector of Ukraine were engaged by foreign and native researchers, such as: J. Marshall, R. Peterson, R. Rynutro, R. Levin, V.  Geets, A. Shapovalov,  A. Dzyublyuk, F. Shpyg, A. Yepifanov, A. Moroz, R. Nabok, N. Sheludko, O. Baranowski et al.

At present, foreign capital occupies an important place in Ukraine's banking system, as evidenced, in particular, a considerable share of foreign banks in the domestic market loans and deposits. In recent years, the share of foreign capital in the banking system of Ukraine has increased, and there are prospects for increasing the level of 50%. By 01.01.2014 the share of foreign capital in the authorized capital of banks in Ukraine amounted to 41.8%.  But we can’t definitely say about the complete dependence  of the banking system of Ukraine from foreign countries – dependence can be defined as relatively high [1].  

In recent years, foreign banks were able to increase their presence in the domestic banking sector. At that time, most scientists believed active expansion of foreign banks a good thing for a number of these reasons related to the need of:

-       optimization of the structure of the banking system of Ukraine and of the creation of such a model that would correspond economically developed countries, particularly the European countries;

-       expansion of the range of banking services and improve their quality;

-       raising additional resources through foreign banks to finance the economy of Ukraine;

-       widening people's access to credits due to lower interest rates on loans by foreign banks;

-       integration into the world economy and reduce dependence banking system of internal risks;

-       opening the access for opening branches of foreign banks in the domestic banking sector to satisfy the conditions of WTO;

-       increasing international financial ratings of Ukraine to attract foreign investment not only in banking, but also in other economic sectors [2].

Nowadays it can be argued that foreign banks have made some contribution to the development of the domestic banking system and the economy of Ukraine in general. Therefore now excessive presence of foreign capital in the banking system of Ukraine is regarded as undesirable phenomenon that brings with it a certain risks for the Ukrainian financial market and economy of Ukraine in general. These threats can include:

-                   threat of economic independence – Ukraine's sovereignty;

-                   objectives of foreign banks may not always match with national development objectives of the country's economy and its social sphere;

-                   realization by foreign banks speculative and incomplete range of banking services;

-                   threat to the economic security of Ukraine in connection with possible uncontrolled outflow of foreign capital and financial resources;

-                   selective customer service and providing banking services only for industries with high profits and low risks;

-                   increasing dollarization of the Ukrainian economy and the threat of lowering the stability of the national currency;

-                   a sudden outflow of foreign capital in case of change of economic situation in Ukraine or in the country based mother structures of foreign banks;

-                   complications of banking supervision for foreign banks;

-                   worsening of social tensions in the country. 

Conclusion. Uncontrolled inflow of foreign capital in the banking system Ukraine creates conditions for building a permanent deficit balance of payments and, consequently, creates a threat depreciation national currency, has a negative impact on the foreign exchange reserves of the National Bank of Ukraine is dependent on foreign borrowing.

The most appropriate is to develop a mechanism for regulating and monitoring the activities of foreign banks in Ukraine with relevant legislative field, in which the share of foreign capital in the banking system will grow and will be optimal for Ukraine in case of problematic situations in foreign banks, their negative effects will be minimal and not be experienced in the banking sector of Ukraine and its economy.

 

Literature:

1.            Official  Web  site  of  the  National  Bank  of  Ukraine  [electronic  resource] //Access mode: http://bank.gov.ua.

2.            Ivasiv I. Effect of foreign banks in the banking system of Ukraine [Text] / I. Ivasiv,  R. Kornylyuk / / Bulletin of the National Bank of Ukraine. - 2011. - Oct. - P. 84-91.