Regulatory assessment of the bank market risk: international approaches and Ukrainian practice

Abstract

The implementation of international standards for the bank risk assessment and market risk, in particular, in Ukrainian banking practice is aimed at achieving common standards for regulating banking activities in different countries. This should help to increase the banking sector stability in Ukraine and, accordingly, increase the interest of foreign investors.The article deals with the methodological approaches to assessing the bank market risk (in particular, SA, IMA and R-SbM approaches) recommended by the Basel Committee on Banking Supervision in terms of standardization and unification of the normative framework of capital requirements for Ukrainian banks. Considering the analysis results, it was determined that the choice and implementation of an optimal approach in the context of Ukrainian banking practice can be carried out in one of two alternative scenarios: 1) a simplified version of a sensitivity based method (R-SbM); and 2) a recalibrated version of the Basel II standardized approach. In this case, the Basel II recalibrated version is more acceptable for use by banks, since it is most relevant to volume and complexity of transactions carried out by Ukrainian banks.The obtained results are aimed at improving the existing methodology for calculating the adequacy ratio of banks' regulatory capital (N2), which currently considers only the needs for credit risk coverage, and at refining the methodology in terms of considering banks' market-risk coverage needs.

Examining the Determinants of Credit Risk Management and Their Relationship with the Performance of Commercial Banks in Nepal

“…These rules are designed to ensure that banks hold enough capital to cover potential losses from market risks such as changes in interest rates, foreign exchange rates, and commodity prices. Kuznichenko et al (2018) pointed out that market risk refers to "the risk of loss of off-balance sheet items due to changes in market prices". Stock prices, interest rates, foreign exchange rates, and commodities hazards are the main elements that might cause market risk to appear.…”

European Deposit Insurance Scheme implementation: pros and cons

“…Transferring the supervision over the banks on the European level is the key element of this process, which consequently should be united within other steps, such as a common system for deposits' protection and integrated bank crisis management (Rompuy, 2012). Kuznichenko et al (2018) developed methodical approaches to the assessment and supervision of the banking market risk (in particular, the SA, IMA and R-SbM approaches) recommended by the Basel Committee on Banking Supervision in terms of standardization and unification of the regulatory framework for capital requirements.…”

“…The SRM is an instrument responsible for providing orderly resolution of failing banks with the minimal cost for both taxpayers and the economy. The SRM is also in charge of the application of a common set of rules and manages the European Single Resolution Fund (ESRF) fully funded by the industry (Kuznichenko et al, 2018). However, the third and the last pillar of a banking union is the European Deposit Insurance Scheme (EDIS), which was supposed to provide a solid and more constant degree of insurance coverage in the Eurozone.…”

The use of biometric technologies for bank transaction security management against the background of the international experience: Evidence from Ukraine

“…However, this raises issues related to efficiency, security and risks of biometric technologies in banking now and in the near fu-ture in Ukraine. Kuznichenko et al (2018) made comparative assessment of the regulatory and legislative measures in Ukraine and foreign countries concerning consumers` protection against illegal actions in the banking sphere. There is the risk associated with confidentiality and privacy if biometric signature gets misused or stolen.…”