1. Regulatory framework in emerging markets: outlining the crises impact Prof. Iryna D’yakonova, Ukrainian Academy of Banking, Ukraine & Tatiana Scherbina, Ukrainian Academy of Banking, Ukraine

2. Aims Investigating the affects of the economic crisis (2007)on Banking Supervision in developing countries Identifying specific features in Ukrainian regulative framework

3. Banking Supervision Systems in EU’s countries CountryModel SectoralTask-orientedMega-regulator Austria+ Belgium+ Greece+ Denmark+ Estonia+ Ireland+ Spain+ Italy++ Cyprus+ Latvia Lithuania+

4. Banking Supervision Systems in EU’s countries CountryModel SectoralTask-orientedMega-regulator Luxemburg+ Malta+ Germany+ Netherlands+ United Kingdom+ Poland+ Portugal++ Slovakia+ Slovenia- + Hungary+ Finland+ France++ Czech Republic+ Swiss+ Bulgaria+ Romania+

5. The Financial Architecture in some countries according to the structure index PlaceBank-oriented architectureMarket-oriented architectureBank-oriented architectureMarket-oriented architecture Developed countriesDeveloping countries 1PanamaNetherlandsBangladeshDenmark 2TunisThailandNepalPeru 3CyprusCanadaEgyptChile 4PortugalAustraliaCosta RicaJamaica 5AustriaRepublic of South AfricaBarbadosBrazil 6BelgiumSouth KoreaHondurasMexico 7ItalySwissTrinidad and TobagoPhilippines 8FinlandGreat BritainMauritiusTurkey 9NorwaySingaporeKenya- 10New ZealandUSAEcuador-

6. The Capital Structure of Banking System, 2004

7. Main indicators of banks activity in groups according to source of capital origin as on 01.07.2010 (bil. UA) №Criterion Ukrainian banks which includes: Banks with western capital Banks with Russian capital Total State owned banks Private owned banks Number of banks in group11551103910164 1Total Assets431,11152,69278,42367,5978,62877,31 Group ratio, %49,1417,4031,7441,908,96100,00 2Net worth77,6038,1339,4738,259,71125,56 Group ratio, %61,8130,3731,4430,467,73100,00 3Loan portfolio312,32106,48205,84295,4663,34671,12 Group ratio, %46,5415,8730,6744,039,44100,00 3.1including consumer loans55,5811,1444,44135,208,68199,47 Group ratio, %27,865,5822,2867,784,35100,00

8. Growth of banks external debt (bil. USA)

9. Structure of loans by the end of 2004 by the end of 2008

10. Bank loans according to source of capital origin

11. Background for the crisis: - total dollarisation of the economy; - increase in the share of foreign capital in the banking system to 40%; - foreign currency loans; - inadequate growth in consumer lending (over 100% per year), mostly in foreign currency; - insufficient crediting at reasonable interest rates of the real economy; - excessive external debt of corporate and banking sectors, which exceeded the external debt of the state almost in twice; - artificial strengthening of hryvnia to U.S. dollar in the summer of 2008; - negative trade balance.

12. Ukraine banking structure pre and post economic crisis The world crisis in Ukraine started in financial sector and then spread through the rest of the economy. Flight of deposits and high level of corporate debts caused to the lack of liquidity in Banking system Exchange devaluation followed by inability to provide stable servicing the loans.

13. Banking regulation in Ukraine pre-crisis The banking system of Ukraine consists of the National Bank of Ukraine (NBU) and other domestic banks and subsidiaries of foreign banks operating in Ukraine The banking system enjoys a strategic position in the economy, which is explained by its major functions such as: securing the stability of the national currency; accumulation and redistribution of financial resources of the general population and companies into credits and investments; regulation of supply and demand of money in the economy; organization and harmonization of payments in the economy.

14. Board of directors on banking regulation and supervision structure till 2008 Department of banks’ registration and licensing Department of banking regulation and supervision Department of banking methodology regulation and supervision Department of banking activity expiration Department on the matters of banking system usage for the legalization of criminal income and terrorism financing Board of directors on banking regulation and supervision

15. Organizational structure of banking regulation and supervision of the Central Office (Bodies) of the National Bank of Ukraine as at 12.03.2011 Deputy Head of the NBU General department of banking supervision The regulatory and methodological support for banking regulation and supervision department Financial Monitoring department Foreign exchange transactions control, methodology and licensing department Banks registration, licensing and reorganization department

16. Legislative changes requirements to the commercial banks in the field of banking activity regulation determining the order of state participation in banks capitalization complex of measures for providing stability of the banking system in a period of financial crisis

17. Deposit protection scheme The Deposit Guaranty Fund is created for protecting the rights of individual depositors (natural persons) in 1998 The participants are domestic commercial banks and the branches of foreign/international banks in Ukraine

18. Changes in deposit protection the size of compensation is increased from 50 000,0 to 150 000,0 of hryvnyas NBU pays annual contributions to Deposit Guaranty Fund the Fund has an ability to be credited by NBU on refinancing interest rate terms

19. Key questions in Baking Supervision: Lack of independence –institutional –operational –financial independence Regulatory structure –Ukraine – without considerable changes after crisis –What framework is better?