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Gudyma A., Gnatyuk V.
Vinnitsa technical college
Challenges
in attracting foreign investment into the development of Ukrainian banks and
the ways of their solutions
The article is
dedicated to the investigation of inclination of involving foreign bank capital
in Ukraine, the observation of basic investment problems and their solution.
Keywords: foreign bank,
foreign capital, foreign investment, the mechanism.
The topicality of this work. The problem of lack of financial resources inside the country appears in
the conditions of financial crises. Involvement of foreign capital into the
Ukrainian bank section constructs an extra resource base and increases the
standard of bank capitalization. At the same time, the rapid growth of the part of foreign capital can cause a set
of negative issues, such as: decrease of competitiveness of native banks, loss
of sovereignty in country’s monetary and credit policy. That is why, an
involvement of foreign bank capital in
Ukraine depends on accurate and effective mechanism of admission of foreign
banks into the domestic market of bank services.
The analysis of the latest investigations and publications.
A large number of scientific works of foreign and
domestic scientists, in particular, G. Clark, B. Williams, Baranovskiy O.,
Heyets V.M., Kochetkov V.M., Sloboda L., Stepanenko B, Parasiy-Verhunenko I.M.,
T. Altman, L. Goldberg, B. Dages B., R. Levine, P. Krugman, M. Lehner, A. Mikko, G. Pik etc., are devoted to the
estimation of presence of foreign capital in Ukrainian bank section. Though, in
spite of large amount of publications to this topic, the problem of foreign
investment in the bank system of Ukraine is still remained opened.
The aim of investigation. The
aim of this article is lying in investigating the involvement of foreign banks
into the domestic market of bank services and finding the solutions of problem
of foreign investment into the bank system of Ukraine.
The exposition of the main material. In recent years the role of foreign capital in the bank section of
Ukraine increases. As of 01.01.2013 the
amount of functioning banks with
foreign capital increased to 53,
including 12 banks – with 100% foreign capital. (pic. 1).
Pic.1 The dynamics of participation of foreign capital
in the bank system of Ukraine
The main reason
of foreign bank’s entrance into the
other markets is a search of not overfilled, less developed and less effective
markets, in order to implement its competitive advantages, such as:
high-quality services, less interest rates
on credit, more perfect management of risks, bigger capital amount. In
addition, it is considered that the foreign investor is more interested in
Ukrainian market of bank services due to: low interest rates, the development
of bank system, high run on foreign investment, low barriers of market entry,
cheap labor force.
There is a large
amount of huge European financial groups on the domestic market of bank
services. Its interest in Ukraine manifested
Austrian Raiffeisen Bank International AG (purchasing Aval bank), French BNP Paribas (UkrSibbank),
dutch TBIF Financial Services Group NV (VABank), russian ‘Renascence-capital’ (bank ‘Lider’), Austrian UniCredit Bank
Austria AG (Ukrsotsbank) etc. Besides, a practical interest
to Ukrainian banks was also manifested by austrian Erste Bank (bank
‘Prestige’), french financial group Credit Agricole (‘Kalion’, ‘Index-bank’),
Czech PPF Group (Agrobank, PrivatCredit),
Greek EFG Eurobank Ergasias (Universal), Russian bank ‘Russian Standard’
(AIC-bank). An additional information about the process of acquisition of
Ukrainian banks by foreign investors is pointed at table 1.
Table 1
Acquisition
of Ukrainian banks by foreign investors
|
Year |
Bank |
Purchaser |
Part of shares,
% |
Transaction
amount, mil. dol. |
|
2005 |
Aval |
"Raiffeisen
International" (Austria) |
93,5 |
1028 |
|
2005 |
UkrSibBank |
"BNP
Paribas" (France) |
51 |
350 |
|
2005 |
VABank |
"TBIF
Financial Services Group" (Nitherlands) |
9,55 |
8,75 |
|
2005 |
"Forum" |
Bank
of New York |
10 |
20 |
|
2006 |
"Mrija" |
Vneshtorhbank
(Russia) |
98 |
70 |
|
2006 |
Raiffeisenbank Ukraine |
ÎÒÐ
bank Plc. (Hungary) |
100 |
130 |
|
2006 |
Megabank |
Group of portfolio investors |
20 |
19 |
|
2006 |
"Nadra" |
Group of portfolio investors |
7,7 |
53 |
|
2006 |
Rodovid-bank |
Group of portfolio investors |
18,9 |
47 |
|
2006 |
Index-bank |
"Ñredi
Agricole S.A."(France) |
98 |
255 |
|
2006 |
VAbank |
"TBIF
Financial Services Group" (Nitherlands) |
17,55 |
17 |
|
2006 |
"Prestige" |
Erste
Bank (Austria) |
50,5 |
35 |
|
2006 |
Universal |
"Eurobank
Ergasias" (Greece) |
99,34 |
49,5 |
|
2006 |
Agrobank |
Financial Group
PPF (Czech) |
100 |
300 |
|
2006 |
AIS-bank |
"Russkij Standart"
(Russia) |
100 |
9 |
|
2006 |
Megabank |
Bank
Austria Creditanstalt (Austria) |
12,6 |
|
|
2006 |
"Privatinvest" |
Financial Gruop
PPF (×åõ³ÿ) |
100 |
18 |
|
2007 |
Tas-Commertsbank,
Tas-investbank |
Swedbank |
100 |
735 |
|
2008 |
Praveks-bank |
Intessa Sanpaolo (²taly) |
100 |
750 |
|
2008 |
Ukrsotsbank |
UniCredit Group (²taly) |
94,2 |
1160 |
|
2011 |
PrivatBank |
Triantal Investment Ltd.
(Cyprus) |
25 |
425,2 |
Let’s analyze the index of 10 Ukrainian banks’
capital profitability with Ukrainian capital and with the foreign capital
(table 2).
Table 2
Banks’ capital profitability with Ukrainian capital and with foreign
capital
|
Banks |
Years |
|||||
|
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
|
|
PrivatBank
(Ukraine) |
28,5 |
15,8 |
10,2 |
11,5 |
8,5 |
8,4 |
|
Ukremsimbank
(Ukraine) |
19,5 |
13,8 |
0,2 |
0,3 |
0,5 |
0,9 |
|
Oschadbank (Ukraine) |
9,4 |
2 |
4,2 |
2,8 |
3 |
3,1 |
|
ReffeisenBankAval
(Austria) |
11,2 |
7,1 |
-38 |
0 |
0,5 |
0,5 |
|
Prominvestbank (Russia) |
8,7 |
3 |
-48,8 |
-18,4 |
0,6 |
4,3 |
|
Ukrsotsbank
(Austria) |
11,3 |
15,3 |
2,1 |
0,4 |
0,2 |
0,1 |
|
VTB Bank (Russia) |
1,5 |
2,2 |
0 |
-11,1 |
14,4 |
23,5 |
|
Delta Bank (The USA) |
0,9 |
11,5 |
1,4 |
2,5 |
32,4 |
3,3 |
|
PUMB(Ukraine) |
2,5 |
0,4 |
-30,5 |
8,3 |
6,7 |
6,4 |
|
Bank
Finance and Credit (Ukraine) |
15,7 |
5,8 |
-22,2 |
-10,2 |
-4,5 |
0,2 |
As we can see
from table 2, in 2007-2010 the highest level of capital profitability had
domestic bank – PrivatBank, which has the largest amount of assets and is one
of the largest with his proper fund. This bank had the highest level of
profitability even during the crises -10,2%, although it didn’t correspond with
the normal standards. In 2011 the highest level of capital profitability had
the bank with american fund Delta Bank, it reached 32,4%, and in 2012 the best
index had the bank with russian fund VTB Bank – 23,5%. As of 2011 the foreign
fund in ukrainian bank system is represented of 21 countries(pic.2). In the
structure of domestic bank system the main part of foreign fund is included
into the fund of Russia (9,2%), Cyprus (7,2%), Austria (5,0%), France (4,5%),
German (3,7%) [6, p.68]
Pic. 2 The structure of foreign fund of the domestic
bank system
Another counties,
which are interested in ukrainian financial markets are: Italy, Poland,
Switzerland, Great Britain, Sweden, The USA. In Ukraine the expansion of
foreign fund is effectuated in particular at expense of consolidation and
acquisition of banks. Ukrainian banks can be sold in such ways:
1. Absolute
sale. In this case the client buys the promoter’s stock of domestic bank, as a
result the financial institution passes to his possession. This method is the
most broadened and was used by ‘Raiffeisen
Aval bank’
(Austria), ‘Index-bank’ (France).
2. The bank sale with
the further combined run of business. This method is used for banks, which
already belong to financial industrial groups and can’t be sold completely.
Such bank as, ‘Ukrsocbank’ (Austria) chose this method.
3. Commercial
sale of shares on the stock exchange. This method is profitable for bank
enterprises and departments, which shares are freely traded on market. The
following banks, as ‘Megabank’ (German), ‘Forum’ (German) were sold with the
help of this method.
4. Offering
domestic bank’s shares to the public on the world stock exchange (IPO). ‘Nadra’
bank (Austria) was sold with the help of this method.
According to
rating of financial analysts, during 2013-2014 the development of Ukrainian
bank system occurs in the following directions: the concentration of the bank
section, the lack of financial resources, the activation of consolidation and
acquisition processes in bank enterprises and departments, the considerable
increase of foreign banks’ share, the decrease of bank amounts, more narrow
bank specialization, the increase of bank commercial networks, etc.
The main problems
of state control of foreign investment into Ukrainian bank system are:
instability of basic legislative acts concerning the conditions of foreign
investment, imperfect regulatory framework on corporative management,
fulfillment of property rights both large and minority investors, complication
of arrangement and long-term periods of registration and closing a business,
receiving permits and licenses,
complexity of extra charge procedures and payment of taxes and transparency in
making decision by local administration, overcoming bureaucracy and corruption.
The basic directions of
state investment policy, which have to provide a stimulation of direct foreign
investment procedures of Ukrainian bank system, are: to promote the development
of small and medium-sized businesses, providing a
differentiated approach to tax and other incentives
for foreign investors considering
the volume, form and the investee; to
facilitate the growth of bank section as a whole, as well as stock and
insurance markets; to provide reliability, accessibility and efficiency
organizational informative support of foreign investment, the development of
necessary modern infrastructure; revision and intensification of special
economic spheres, improving the mechanism of its investment; to promote the
development of national and transnational corporations of specialized credit
financial institutions; use of state investment in order to create primary
conditions for involving private and foreign investment in the development of
priority directions of bank section;
the use of ‘golden rate’ institute for preserving the state right to influence
on the activity of enterprises, which are very important for national economic
and political security, after their privatization, especially in case of
transition of the control over the activities of foreign investors; providing
ukrainian agency of investments and innovations modeled on similar investments in Poland («PAIiIZ»)
and Czech Republic («Czech Invest»);
development of the state system of
monitoring the effectiveness of foreign
investment with details of
economic activity, timing and so on.
Conclusions. At present the
foreign capital occupies more place in the bank system of Ukraine. The functioning of foreign banks in the domestic market
leads to both new opportunities and serious
financial and economic risks.
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