CURRENT PROCESSES OF BANKING COMPETITION: TODAY REALITIES
Abstract
Banking competition is radically different from other sectors of the economy, since banks have their special function in the financial system and play an important role in the development of socio-economic systems. The generally accepted theory of competition for competition in terms of cost minimization and distribution efficiency is not entirely equitable for banking, since many problems in the market undermine the nature of competition and its results. Banking features are associated with increased internal and external risks. In this paper, competition in the banking sector of Ukraine is investigated and its specific characteristics are considered. The uniqueness of competition has been proved, models and innovative products in the banking sphere have been presented, problematic issues of competition in the banking system have been revealed. It has been determined that the process of liberalization and deregulation has changed the banks' focus on deposit collection and provision of loans for various types of activity, which has intensified competition in the banking sector both inside and outside the banking industry. Information technology provides securitization that positively transforms illiquid loans, that is, mortgage loans into trading instruments. Such actions could provide more loans to investors and distribute credit risk to investors with different risk profiles. Considered the business models of large banks and it is proved that they are characterized by lower risk of weighted capital, higher non-interest income, a smaller share of deposits in total liabilities. The sources of instability of banks that arise from liabilities and assets through the bank and systemic crises due to excessive risk acceptance are identified. Competition with new positions worsens the quality of the banking portfolio, which adversely affects banking, banks have to reduce their investments to improve the quality of screening tests of borrowers. In banking, various measures are being implemented to improve the competitiveness and management of modern banks.
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