Международная студенческая научно-практическая конференция «Инновационное развитие государства: проблемы и перспективы глазам молодых ученых». Том 2

Reznik O., Mudrenko A.A., Kotlova L.N.

Oles Honchar Dnipropetrovsk National University, Ukraine


Bank capital is the core of any bank as the processes of capital and lending are closely interrelated. Therefore, understanding the economic content of bank capital, the value of issues related to its effective formation and appropriate use, is extremely important, especially for Ukrainian commercial banks.

In our opinion it is relevant for each commercial bank to simulate ways and sources of its activity. Topical character of a problem is determined by the role of capital, including regulatory one, in setting up a bank and its operation during a crisis [3].

In order to determine the regulatory capital value, the total own bank capital of the first and second levels increases by the amount of a subordinated debt and reduces by the value of shares and other securities in a bank’s trading portfolio and a bank’s portfolio held for sale; equity investments in associates and subsidiaries, by the amounts of other transactions, and restrictions are imposed on the size of additional capital – no more than 100% of capital.

Indeed, regulatory capital is a collection of various balance sheet items that characterize the risks of banking activities and may result in loss of equity. Therefore, the estimated value of regulatory capital offers a real assessment of the amount of equity targeted at possible losses of bank’s risky operations. This caused the use of regulatory capital by banks to calculate the economic standards, performance indicators, evaluate stability and reliability, the central bank uses it to monitor compliance with established standards [5].

Qualified and experienced professionals have to monitor continuously banks in order to introduce new Basel requirements in Ukraine.

If we just raise standards to the level when regulatory capital is adequate to risks that banking institutions deal with in course of their business and don’t elaborate some extra measures for using more flexible methods of assessment of the bank assets actual riskiness, then it can lead to undue restriction of opportunities for banks further development, and hence the whole economy.

It is obvious that if Basel II standards are introduced, the problem of banks low capitalization will worsen and volume of active operations will go down. That’s why banks should take immediate steps: to reduce costs and increase profits with their further reinvestment, create effective risk management systems, their diversification and insurance, optimize a bank’s organizational structure, set up domestic credit centers and others. Only if these measures are implemented, can we expect that upgrading of the standards of equity based on the phased application of international experience will strengthen the stability of the banking system and enhance its positive influence on the economy.

Nowadays regulatory capital value of domestic banks is regulated centrally in the relevant regulations of the National Bank of Ukraine on the basis of Basel I requirements, it is regulated in accordance with the two aspects: institutional – setting minimum requirements for regulatory capital (H1) and in terms of capital – risk ratio, the standards of regulatory capital adequacy to risks (H2). The NBU recommendations as for minimum regulatory capital of banks are used to implement the institutional regulation of equity in the domestic banking practice. In early 2004 the National Bank of Ukraine introduced annual standard calculation of the banks regulatory capital (H1) in hryvnia considering the rate of euro on January, 1 and the average rate of the currency in the last quarter of the previous year [2].

As for equity capital – bank risk ratio the level of regulatory capital adequacy ratio for local banks is carried out by using H2 standard- regulatory capital adequacy, the main goal of which is to establish the need to prevent excessive banks shifting of credit risk and risk of banking assets default on creditors and depositors [4].

 Each year the NBU determines and sets minimum regulatory capital in hryvnias for a certain period of time (a year) and it amounts to the value set in euros. Minimum regulatory capital is determined in hryvnias by the NBU each year and banks must comply with it till the end of each period (a year).

In case banking system worsens due to the global financial crisis, a number of laws and regulations have been developed aimed at reducing the negative impact of the crisis on banking institutions. Passed acts regulate issues related to the deterioration of borrowers’ and bank customers’ financial position, ways to restructure loans by changing the exchange rate against foreign currencies have been developed, capitalization has been increased and stable operation of banks has been ensured.

Thus, the regulatory capital of banks plays an important role not only in bank activities but also facilitates the analysis and supervision of the banking system. Maintaining the appropriate level of regulatory capital value, banks are able to control and prevent risks arising in the process of active and passive operations. In turn, the National Bank ofUkraine has taken necessary measures to maintain the liquidity of banks and ensure financial stability of the banking system of Ukraine.


1. Bytska N. bank capital in the economy of Ukraine // Herald of the NBU. – 2006. – № 1. – S. 50-57.

2. Herasymenko estimation of the capital of Ukraine in the financial crisis / V. Gerasimenko, Gerasimenko R. // Herald of the NBU. – 2010. – № 10. – S. 12-17.

3. Dzyublyuk O. Problems of ensuring the effective functioning of the banking system in a transition economy // Herald of the NBU. – 2005. – № 3. – S. 31-37.

4. Dovgan J. Bank capital: the nature and value // Herald of the NBU. – 1998. – № 7. – S. 18-20.

5. Dovhan J. Formation of the equity of commercial banks in Ukraine in the context of European integration // Bulletin of the Ternopil Academy of National Economy. – Ternopil: Economic thought, 2000. – S. 186.