Cistran Finance Exploring the Spirit of Capitalism's New Frontier

Friday, January 18, 2019

Tougher EU capital requirements cause fall in activity of foreign banks in Ukraine

A drop in foreign banks' participation in the Ukrainian market is a result of tougher capital requirements in the European Union, Governor of the National Bank of Ukraine Ihor Sorkin said on Wednesday.

"Bank regulators in the EU over the past few years have considerably toughened the requirements on the adequacy of capital of European banking groups and are continuing to do so, including as a part of the implementation of the Basel III standard," Sorkin said, according to Interfax-Ukraine. "Banks can observe the requirements by increasing the level of their regulatory capital, or if they cannot do this, by cutting their assets."

Sorkin said that many European banks have revised their business models, operating mainly in their domestic markets while narrowing their presence in many central, Eastern and Southeast European countries.

"Due to the impact of all the said factors, the share of foreign capital in the Ukrainian banking system over the past several years has slightly fallen: while as of early 2009 it was 36.7 percent, as of Oct. 1, 2013, it was 34.2 percent. The size of foreign capital over the said years more than doubled, from UAH 30 billion to UAH 62 billion," Sorkin said, Interfax-Ukraine reports.

Sorkin also said that the improvement of the global economy would help boost promote foreign capital inflows into Ukraine.

"As soon as the economic situation in the world stabilizes and active economic growth resumes in investor countries, the trends of capital movement for Ukraine could change towards an increase in the presence of foreign capital, and not only in the banking system, but in the economy as a whole," Sorkin said, according to Interfax-Ukraine.