EUROPEAN BANKS IN UKRAINE: MODELLING RISKS, REWARDS AND MAKING FORECASTS

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Helen Kostyuk, Alex Kostyuk, Yaroslav Mozghovyi

DOI:10.22495/rgcv4i4c1art3

Abstract

The new model for banking control and regulation, suggested by Basel III, together with high dividend expectations of shareholders have fostered the transformation of the business model in European banking. The scale of market shares no longer plays an important role in banking business. The emphasis is now laid on its efficiency. It is determined by ROE indicators, the positive dynamics of which serves as: a good indicator for ensuring a proper level of capital adequacy of the bank and reducing systemic risks; a precondition for meeting the dividend expectations of shareholders; evidence of effective management of capital assets and bank costs. Thus, assessing and preventing the outflow of foreign capital from the national banking sector, the national market regulators should clearly understand the motivation behind it and take into account the business strategies of parent European banks, which include the following points: low liquidity of the stock market of the Eurozone, which significantly complicates the process of capitalization of European banking institutions, and inability to attract capital in sufficient amounts; potential opportunity for capitalization of banks (to meet the requirements of Basel III) in the context of bank management and shareholders relations (improvement of profit management policy and dividend policy); optimization of asset management policy in order to reduce RWA assets in the assets of both parent and subsidiary banks.

Keywords: Banks, Risks, ROE, Basel III, RWA, Shareholders, Dividend Policy

How to cite this paper: Kostyuk, A., Kostyuk, H., & Mozghovyi, Y. (2014). European banks in Ukraine: Modelling risks, rewards and making forecasts. Risk governance & control: financial markets & institutions, 4(4-1), 91-98. http://doi.org/10.22495/rgcv4i4c1art3