Research and minimization of domestic banks entering risks to financial markets of Latvia
Students Name: Nazarenko Viktoriia Leonidivna
Qualification Level: magister
Speciality: International Business
Institute: Institute of Economics and Management
Mode of Study: full
Academic Year: 2023-2024 н.р.
Language of Defence: англійська
Abstract: This paper examines the study and minimization of the risks of domestic banks entering the financial markets of Latvia. The work includes four chapters, in which the theoretical and methodological principles of the entry of Ukrainian banks into international financial markets, analysis of international economic relations between Ukraine and Latvia, proposals for the entry of Ukrainian banks into the financial markets of Latvia and methods of reducing risks are given. Financial markets play an important role in the economy of various countries. This is an indicator of the level of their development, which indicates existing gaps and possible promising areas of activity. Financial markets affect various components of the domestic economy, determine the main features and characteristics of each sector and are a link between available sources of free financial resources and entities that need these resources and consider them important.[1] The goal of Ukraine is European integration, and one of its priorities is the gradual approximation of economic, political, educational and social standards to world and European ones, it is extremely important to study foreign experience in these spheres, especially in the economic sphere. The intensive development of international financial markets, the growth of international trade and the development of new banking products lead to the fact that the activities of credit institutions are increasingly becoming transnational in nature. In this context, the study of the principles and conditions of functioning of international financial markets is becoming more and more important. International financial markets are an integral part of the world economy. The international division of labor is the basis of all economic relations at the global level, and therefore international financial markets help to ensure a more rational distribution and use of world resources and contribute to the deepening of the specialization of international production. This leads to the emergence of new forms of cooperation between states, including at the financial level.[2] JSC KB "PrivatBank" provides universal service for a wide range of clients and is the leader of the Ukrainian market in the retail segment, actively promoting services for small and medium-sized businesses and selectively working in the corporate sector. The basis of the bank’s resource base is the funds of individuals in the national currency with a significant share of current accounts. The bank’s strategic goal is to build a high-quality credit portfolio of retail loans and loans to small and medium-sized businesses (SMEs). The bank has a powerful Privat24 transaction platform, which allows you to effectively serve account management operations for clients of all segments and ensures a high level of commission income. Along with online services, the bank has an extensive network of branches, ATMs and self-service terminals that allow providing services throughout the country (with the exception of temporarily occupied territories). The bank’s management policy is aimed at effective management of all types of resources, improvement of the bank’s financial indicators, as well as increasing the value of its assets. Therefore, an important element of corporate management is the regular development, consideration and approval of the development strategy, as well as the determination of priority areas of activity for both individual business areas and the bank’s activities as a whole. The risk management function in the bank is carried out in relation to financial risks, as well as non-financial risks (operational, legal, compliance risks and reputational risk). Financial risks consist of market risk (which includes currency risk), credit risk, interest rate risk of the banking book and liquidity risk. The main task of financial risk management in 2022, caused by the start of military aggression against Ukraine, was anti-crisis management. Indicators of risk appetite and risk limits were established by the Supervisory Board at the beginning of November, after carrying out a number of anti-crisis risk management measures and obtaining actual and forecast data on key indicators of the bank’s activity.[3] For the purpose of effective risk management, the bank has created and operates a risk management system, which provides for the distribution of rights, duties, and responsibilities between management bodies, structural divisions of the bank, separation of the processes of identifying and assessing risks, evaluating the effectiveness of the risk management system from the process of accepting risks. [4] Banking risk management allows to minimize the impact of negative consequences on the bank’s activities, improve the efficiency of their operation, increase income and capital gains. The implementation of specific methods and models of banking risk regulation in daily banking practice, improvement of tools for reducing these risks will make it possible not only to increase the reliability of functioning and profitability of Ukrainian banks, but also to improve the most important indicators of the banking system in general.[5] The object of the work is JSC CB "PRIVATBANK", registered on 03/19/1992 at the legal address of st. Hrushevsky, 1d, Kyiv 01001, Ukraine. The EDRPOU code is 14360570. PrivatBank was registered by the NBU in the "Bank Registration Book" under No. 92 dated March 19, 1992. NBU license No. 22 dated March 19, 1992. The head of the organization is Bosch Gerhard. The sole shareholder of the bank, which owns 100% of the shares, is the state in the person of the Cabinet of Ministers of Ukraine (location: 01008, Kyiv, Hrushevskyi St., building 12/2). The main type of activity is other types of monetary intermediation. There are also other types of activities, namely other types of lending, provision of other financial services (except insurance and pension provision), management of financial markets, brokerage of contracts for securities or goods, other auxiliary activities in the field of financial services, except insurance and pension software.[3] The subject of the qualification work is the research and minimization of the risks of domestic banks entering the Latvian markets. The purpose of the study is to develop recommendations for minimizing the risks of domestic banks entering the financial markets of Latvia, using the example of JSC CB "PrivatBank". In the course of the work, the place of Ukrainian banks in the international financial markets was evaluated, the activities of JSC CB "PrivatBank" and the peculiarities of risk assessment of this company when entering the financial market of Latvia were analyzed. Based on the results of the research, the state of international economic relations between Ukraine and Latvia was forecasted, and the rationale for the proposals regarding the development of JSC CB "PrivatBank" activity on the financial market of Latvia was provided. Key words: financial market, bank, risks of entering new markets, minimization, international economic relations, cooperation. References: 1. Volgina, N.O. Synopsis of lectures on the discipline "Financial Market" (for students of the 5th year of full-time and part-time studies of the specialty "Enterprise Economics") [Text] / N.O. Volgin; Hark. national Acad. urban hosp-va - Kh.: KhNAMG, 2009. - 118 p. 2. Galiceyska Yu.M. International money and capital markets: education. manual /Y.M. Galician – Ternopil, Vector 2013.3. Financial activity of a joint-stock company based on the example of JSC CB "PrivatBank". [Electronic resource] - Access mode: https://naukam.triada.in.ua/index.php/konferentsiji/61-tridtsyata-vseukrajinska-praktichnopiznavalna-internet-konferentsiya/759-finansova-diyalnist-aktsionernogo-tovaristva- naprikladi-at-kb-privatbank