DOLARIZATION OF THE FINANCIAL MARKET OF UKRAINE: CAUSES, EVOLUTION, CONSEQUENCES

2021 ◽  
Vol 1 (21(49)) ◽  
pp. 56-66
Author(s):  
Ihor Krupka
Keyword(s):  
Interest Rates ◽  
Financial Market ◽  
Foreign Currency ◽  
Banking System ◽  
Market Potential ◽  
National Currency ◽  
Foreign Banks ◽  
Stable Operation ◽  
Negative Consequences ◽  
International Financial Market

The purpose of the article is to assess the level of domestic financial market dollarization, find out the causes of this economic phenomenon, trace its evolution and identify current features, substantiate proposals to minimize the negative consequences for the financial market and the economy in general. The methods of theoretical analysis, synthesis and generalization, analysis of statistical data and its graphical interpretation are used in the research. The results of the research showed that the main reasons for dollarization in Ukraine were high inflation and sharp fluctuations in the exchange rate of the national currency. In general, the dollarization of national financial markets occurs through the following channels: 1) borrowing on the international financial market; 2) the entrance of foreign banks to a domestic market; 3) investing abroad, when a national financial market is not sufficiently developed to create high-quality and highly liquid assets, dollarization provides rapid access to foreign financial assets and optimization of the profitability and risk structure of an investment portfolio; 4) the difference (spread) between interest rates in national and foreign currency. Based on the study of the domestic financial market, the following conclusions are made: 1) the level of Ukraine`s financial market dollarization in the aggregate and in terms of its separate segments is high; 2) this level poses a threat to the stable operation of financial intermediaries and the banking system in case of the national currency devaluation; 3) currency imbalance of assets and liabilities in the banking system has strongly decreased since 2008, but is still significant; 4) foreign currency is widely used by economic agents in the shadow sector of the economy. We consider the current dollarization level dangerous for the development of the country's financial system, and its reduction to a scientifically sound natural level should become one of the main tasks of the National Bank of Ukraine. Achieving the natural dollarization level and effective use of the domestic financial market potential will allow to intensify Ukraine's national economy development and promote integration into the international financial market and the global financial space.

scholarly journals Regulacija financijskog tržišta prije i nakon svjetske krize

2017 ◽  
Vol 5 (1) ◽  
Author(s):  
Anita Radman Peša ◽  
Vanja Zubak ◽  
Duje Mitrović
Keyword(s):  
Risk Management ◽  
Financial Markets ◽  
Interest Rates ◽  
Financial Market ◽  
Financial Risk ◽  
Banking Sector ◽  
Financial Regulation ◽  
Banking System ◽  
Financial Risk Management ◽  
Macroeconomic Stability

The banking sector in the global economic system is an area of great impact on the preservation of macroeconomic stability. As it turned out, and during the recent economic crisis, whose consequences are still felt in many countries, the collapse of the financial markets has farreaching effects on all of the national financial markets. The aim of this paper is to analyze the existing regulation of the financial markets and its (lack of) performance in the current financial risk management in order to preserve macroeconomic stability, and provide a secure and stable banking system. The purpose of the study was to present financial regulation before the crisis of 2008 / 2009, and to compare it with the regulations issued after the global crisis of 2008 / 2009 in order to conclusion whether it is cosmetic or real changes of regulating the financial system, and whether existing regulation in the future successfully prevent minor and major disruptions of the financial markets. Croatian financial market is especially analysed in the case of manipulation using the benchmark interest rates.

Role of Negative Interest Rates for Energy Assets Pricing in Financial Markets

2021 ◽  
pp. 107-119
Author(s):  
Ismail Ismailov ◽  
Tomonobu Senjyu
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
World Economy ◽  
Foreign Currency ◽  
Banking System ◽  
Negative Interest Rates ◽  
The World ◽  
Energy Assets ◽  
National Banking System

The world economy strives for globalization, and most energy assets are connected with each other through correspondent banks and other mutual operations. The relevance of the topic of the thesis is due to the fact that in September 2019 a number of proposals were made to introduce the practice of negative interest rates in the national banking system due to the fact that Russian energy assets are not profitable to place in foreign currency..

scholarly journals Financial dollarization: Trojan horse for Ukraine?

Ekonomika ◽  
2015 ◽  
Vol 94 (3) ◽  
pp. 21-45
Author(s):  
Nataliia Versal ◽  
Andriy Stavytskyy
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Foreign Currency ◽  
Banking System ◽  
Inflation Expectations ◽  
Domestic Currency ◽  
Currency Exchange ◽  
Bank Deposits ◽  
The Exchange Rate ◽  
Financial Dollarization

The paper revisits the causes and consequences of financial dollarization in Ukraine during the past decade (monthly data). Dollarization in emerging markets plays a dual role: positive and negative. This study of financial dollarization is in the context of resident household holdings of foreign currency-denominated bank deposits and loans. If exchange rates are stable, deposit dollarization allows the withdrawal of money from the shadow economy, and loan dollarization allows the lending of long-term money, which is not possible with domestic currency due to inflation expectations. At the same time, the instability and lack of supply of foreign currencies in the market result in the collapse of household and bank finances, leading to currency risk, credit risk, and liquidity risk. Therefore, the study uses estimate indicators, the deposit dollarization index (DDI), household foreign currency deposits and loans, loan to deposit ratio (LTD), and inflation to find out the tendencies in the context of a changing domestic currency exchange rate. We present three models to reveal the influence of financial dollarization on banking stability. The first one explains the real value of domestic currency deposits through indicators such as M2 (positive), exchange rate (negative), domestic currency deposits (positive), and panic effects (negative). The second one describes the influence of the exchange rate (negative) and panic effects (negative) on foreign currency deposits. The third one explains the DDI through such the exchange rate, M2, and interest rates. The combined models provide an insight about the time necessary to stabilize the Ukrainian banking system.

scholarly journals ANALYSIS OF NON-BANK FINANCIAL INSTITUTIONS ACTIVITY AS PARTICIPANTS OF MODERN FINANCIAL SERVICES MARKET

2018 ◽  
pp. 88-94 ◽  
Author(s):  
Liudmyla Didenko ◽  
Inna Kobzar ◽  
Iryna Khanaliieva
Keyword(s):  
Financial Institutions ◽  
Financial Services ◽  
Banking System ◽  
Foreign Banks ◽  
Stable Operation ◽  
Credit System ◽  
Pension Insurance ◽  
Wide Range ◽  
State Pension ◽  
Credit Institutions

Banking system, that is, the National Bank of Ukraine, other banks and branches of foreign banks operating in the country, is the basis of the Ukrainian credit system. However, non-bank financial and credit institutions play an important role in the financial services market. Today they provide quite a wide range of services and thus become serious competitors for banks. Therefore, the study of the peculiarities of the activities of non-bank financial and credit institutions and their role in the economic growth of the state is an urgent problem for investigation. The article assesses the activities of the main non-bank financial institutions. The main indicators of the effectiveness of non-banking financial institutions in the context of the main segments of the modern financial services market are analysed. The problems that impede the development of the insurance services market, the non-state pension insurance market and the Lombard loan market are identified. It is concluded that it is an urgent necessary to solve the system problems in the financial services market in order to ensure its effective and stable operation in the future.

scholarly journals The Participation Banking As A Distinctive Method And The Its Growing In The Turkish Finance Market-Period: 2007-2013

2015 ◽  
Vol 5 (1) ◽  
pp. 93-111 ◽  
Author(s):  
Ferhat Sayım
Keyword(s):  
Economic System ◽  
Financial Market ◽  
Foreign Currency ◽  
Banking System ◽  
Bank Loan ◽  
Banking Systems ◽  
Western Model ◽  
Comparative Review ◽  
Net Profit ◽  
World Economic

Financial systems and companies has become the most important reason in the weakness of world economic system. The formation and development process of the financial structure also constitutes the infrastructure of the world economic system. The path of the financial system and development has led to discuss with the financial crisis in 2008-2011. One of the argument topic in order to reduce problems caused by the conventional banking system is alternative financing systems. In Turkey, the corporations based on profit share system which are named participation based banking attention, if the alternative banking systems are considered. These banks which settle on different principles in the risk distribution of the portfolio acquired are analyzed more nowadays. Participation based banks are placed in almost every regulation related to banking terms and get their legal infrastructure more stable in the banking legislation of Turkey.This study is a 2007-2013 part of research series. We try to find out the place and the importance of participation based banking with the various sub-headings especially in Turkey. We examine the comparative review 2007-2013 data of participation banks which Total Assets, Equity Net Profit, Collected Turkish Currency and Foreign Currency Funds and Bank Loan Funds, figures for the four participation banks in Turkey. We are comparing the total figures with deposit banks for the same period.One of our primary aim in this essay, to study in the framework of the alternatives of the financial companies and options. These options could be stated as a vibrant and viable well established choice as a non-western model- different from the classical western interest based leading banking system in the globe. Moreover, that participation banking systems’ grow and increase with its resourceful bulk of transactions and shares within the financial market. In addition, we intended to delineate the basic functioning structures, rules, norms, principles, procedures, operations of that alternate banking system in the financial market.

scholarly journals Financial dollarization in the economy of Ukraine

2020 ◽  
Vol 66 (5) ◽  
pp. 131-138
Author(s):  
O. Shchurevych ◽  
O. Kotsemira
Keyword(s):  
National Economy ◽  
Financial Services ◽  
Relative Stability ◽  
Foreign Currency ◽  
Banking System ◽  
Developed Countries ◽  
National Currency ◽  
Loan Portfolio ◽  
Financial Dollarization ◽  
Legal Entities

The essence of dollarization phenomenon is considered in this paper. It is noted that dollarization occurs when the national currency does not completely perform the functions of money. In this case, the national currency is replaced in some transactions by foreign ones. Basically, it is the currency of highly developed countries with sustainable economic development. The defined main causes of dollarization in Ukraine are as follows: depositors attempt to keep their savings from devaluation result in financial crises accompanied by significant devaluation and inflation; distrust in regulator and government actions. The disadvantages of dollarization phenomenon for the national economy development are systematized and the following key ones are identified: decrease in the efficiency of NBU monetary policy, decrease in confidence in the national currency and banking system, decrease in demand for the national currency, growth of shadow economy and as the result tax revenues reduction. It is emphasized that one of dollarization types is financial dollarization, for which level assessment a number of indicators are selected: dollarization of loan and deposit portfolios, dollarization of MQ monetary aggregate. The structure of the deposit portfolio of individuals and legal entities in terms of currencies is considered and it is found that in periods of intensification of the crisis the level of dollarization increased, and in periods of relative stability – decreased. It is generalized that about 40% of the deposit portfolio is denominated in foreign currency. It means that consumers of financial services trust and save more in foreign currency. The structure of the deposit portfolio of individuals and legal entities in terms of currencies is considered and it is found that during the periods of crisis phenomena intensification the dollarization level increases, and during the periods of relative stability – decreases. It is summarized that about 40% of the deposit portfolio is denominated in foreign currency, i.e. the consumers of financial services trust and save more in foreign currency. The structure of the loan portfolio is analyzed and it is determined that the level of dollarization of the loan portfolio of legal entities is more than 40%, and consumer loans in foreign currency are prohibited, so the dollarization of the loan portfolio of individuals decreases annually up to 18%. The ratio of foreign currency deposits to money supply (MQ) is calculated, which, like other calculated indicators, proves that Ukraine has high dollarization level. Based on the carried out analysis, the conclusions concerning the need to coordinate the efforts of the central bank, government, parliament in order to reduce the dollarization level up to the natural level for the elimination of threatening consequences for the national economy are substantiated.

4. The central bank and the conduct of monetary policy

2016 ◽  
pp. 54-71
Author(s):  
John Goddard ◽  
John O. S. Wilson
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Banking Industry ◽  
Banking System ◽  
Central Banks ◽  
National Currency ◽  
The Uk ◽  
The International Monetary Fund

In most countries, the central bank manages the country’s money supply and interest rates. Most central banks hold a monopoly over printing the national currency and have supervisory or regulatory responsibilities for overseeing the banking industry. The central bank typically performs a dual role, operating as the government’s banker, and as banker to the rest of the banking system. ‘The central bank and the conduct of monetary policy’ explains the central bank’s role and describes the central banks of the UK, EU, and US, as well as the International Monetary Fund. It also outlines the central bank’s responsibility for implementing monetary policy and explains the deposit expansion multiplier, interest rate targeting, and quantitative easing.

Regulation of Deposit Interest Rates in Hong Kong

2015 ◽  
pp. 77-83
Author(s):  
M. Leonov
Keyword(s):  
Monetary Policy ◽  
Hong Kong ◽  
Interest Rate ◽  
Interest Rates ◽  
Banking System ◽  
Maximum Level ◽  
Operating Efficiency ◽  
Negative Consequences ◽  
Economic Agents ◽  
Clearing And Settlement

In 1960s, the regulation of deposit interest rate was introduced to maintain stability of the banking system in Hong Kong. Local regulatory mechanism was characterized by direct involvement of banks into determination of the maximum level of interest rates. As deposit rates might be fixed at below market equilibrium level, banks were unbounded to earn rents at the expense of undrawn interest payments to depositors. Unlike to people in other countries, the depositors in Hong Kong had limited access to alternative investment opportunities like mutual funds or deposit institutions. As long as retail deposits were accounted for a significant share of borrowed funds, Hong Kong Association of Banks developed some incentives to discipline banks: in particular, if bank offered deposits with above the maximum permissible rate, it could be excluded from the national clearing and settlement infrastructure. The binding level of rates led to the emergence of new financial products (swap-deposits and NOW accounts) because banks tried to retain dissatisfied customers. To avoid the negative consequences of rate regulation on industry competition and allocation of financial resources within the economy, Hong Kong Monetary Authority took decision to liberalize deposit rates using gradual reform approach in the mid-1990s – early 2000s. The deregulation caused the significant reduction of gap between deposit and market rates and that evidence gave support to the idea of restrictive nature of regulation regime in Hong Kong. At the time of increasing competition in the deposit market, banks were able to increase operating efficiency and maintain profitability. The main benefits were obtained by banks with risky business model that attracted retail deposits to increase the scope of activity. Deposit rate liberalization helped to improve the efficiency of the transmission mechanism of monetary policy. As banks more actively responded to the market situation by adjusting interest rates, the monetary policy actions increased influence on the investment and savings behavior of economic agents. Finally, intensified interest rate competition among banks resulted into the growth of depositors’ welfare, contributing to the sustainable socio-economic development of Hong Kong.

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