Assessment of financial monitoring efficiency in the banking system of Ukraine
-
DOIhttp://dx.doi.org/10.21511/bbs.15(1).2020.10
-
Article InfoVolume 15 2020, Issue #1, pp. 98-106
- Cited by
- 1298 Views
-
542 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The transformation processes taking place in the global economy and the expansion of global business ties increase the overall vulnerability of the international banking system. One of the problems related to money laundering is the process of evaluating the efficiency of financial monitoring measures. The article discusses the issues of assessing the effectiveness of financial monitoring in the banking system of the country. For Ukraine, this problem is especially relevant, because there is a bank-centric model of the financial market (about 90% of assets go through the banking system) in the country. According to official data, 50% of economic activity in Ukraine ends with money laundering. The article presents the improved method that quantifies the level of financial monitoring system effectiveness at commercial banks of Ukraine based on calculations of the integral index. The index indicates the dynamics of the financial system protection degree from the money laundering threat based on the expediency and efficiency of financial monitoring in the banking system. As a result, more comprehensive conclusions about the level of financial security of the country are made. According to assessments, in 2017–2018 the efficiency of financial monitoring of the banking system of Ukraine was at the middle level (about 64%). The proposed method can be applied to evaluate the effectiveness of the financial monitoring system in any country and become the basis for improving the anti-money laundering system through the banking system.
Acknowledgment
The study was conducted as part of state budget research of Sumy State University – Formation of a Public Finance Transparency System as a Prerequisite for Combating Corruption in Ukraine (0118U003585) (in the context of evaluating the effectiveness of financial monitoring of the Ukrainian banking system) and Formation of Tools for the Ukrainian Economy Unshadowing Based on Causal Modeling of Interaction Trajectories of Financial Intermediaries (0120U100473) (in the context of substantiating the need and directions for improving the financial monitoring system in Ukrainian banks).
- Keywords
-
JEL Classification (Paper profile tab)G20, G21, G28
-
References36
-
Tables5
-
Figures1
-
- Figure 1. Dynamics of the integrated performance indicator of the financial monitoring of the Ukrainian banking system, %
-
- Table 1. Performance indicators of financial monitoring of the Ukrainian banking system in 2014–2018, %
- Table 2. Normalized indicators of financial monitoring effectiveness of Ukrainian banks in 2014–2018
- Table 3. Weighting coefficients for the aggregate financial monitoring performance of the Ukrainian banking system
- Table 4. Ranks and weights for determining the integral indicator of the effectiveness of the banking system financial monitoring
- Table 5. The value of Harrington desirability function
-
- Alber, N., Elmofty, M., Walied, I., & Sami, R. (2019). Banking Efficiency: Concepts, Drivers, Measures, Literature and Conceptual Model. SRNN Papers.
- Arafat, M. Ya., Warokka, A., Buchdadi, A. D., & Suherman, N. A. (2013). Banking efficiency and performance: A test of banking characteristics in an emerging market. Journal for Global Business Advancement, 6(1), 13-23.
- Beck, T., Demirgüç-Kunt, A., & Levine, R. (2006). Bank supervision and corruption in lending. Journal of Monetary Economics, 53(8), 2131-2163.
- Besanko. D., & Kanatas, G. (2015). Credit Market Equilibrium with Bank Monitoring and Moral Hazard. The Review of Financial Studies, 6(1), 213-232.
- Böhme, R., Brenner, M., Moore, T., & Smith, M. (2014). Financial cryptography and data security. In International Conference on Financial Cryptography and Data Security. Christ Church, Barbados.
- Brave, S., & Butters, R. (2011). Monitoring financial stability: A financial conditions index approach. Economic Perspectives, 35(1), 22-43.
- Church, Ch., & Rogers, M. M. (2006). Designing for Results: Integrating Monitoring and Evaluation in Conflict Transformation Programs. Washington: Search for Common Ground.
- Demirgüç-Kunt, A., & Detragiache, E. (2000). Monitoring Banking System Fragility. The World Bank Economic Review, 14(2), 287-307
- Department of Economic Strategy and Macroeconomic Forecasting. (2019). Tendentsii tiniovoi ekonomiky v Ukraini u 2018 [Trends in the shadow economy in Ukraine in 2018]. (In Ukrainian).
- Djalilov, Kh., & Piesse, J. (2019). Bank regulation and efficiency: Evidence from transition countries. International Review of Economics & Finance, 64, 308-322.
- D’yakonova, I. I., & Shyyan, D. V. (2013). Metodyka otsinky efektyvnosti finansovoho monitorynhu [Methodology for evaluating the effectiveness of financial monitoring]. Visnyk Ukrayinskoi Akademii Bankivskoi Spravy – Bulletin of the Ukrainian Academy of Banking, 1(34), 10-16. (In Ukrainian).
- Financial Action Task Force (FATF). (2012). International standards on combating money laundering and the financing of terrorism & proliferation (The FATF Recommendations).
- Flood, M., Lemieux, V., Varga, M., & Wong, W. (2016). The Application of Visual Analytics to Financial Stability Monitoring. Journal of Financial Stability, 27, 180-197.
- Halitsyn, V. K. (2001). Modeli ta tekhnolohii system monitorynhu v ekonomitsi [Models and technologies of monitoring systems in economy] (Ph.D. thesis). Kyiv: Kyiv National Economic University. (In Ukrainian).
- Hartmann, P., Straetmans, S., & de Vries, C. (2005). Banking system stability: Across Atlantic perspective (NBER Working Paper. No. 11698).
- Hawkesby, C. (2000). Maintaining financial system stability: the role of macroprudential indicators. Reserve Bank of New Zealand Bulletin, 63(2), 38-52.
- Kočišová, K. (2014). Banking Stability Index: A Cross-Country Study. In Proceedings of the 15th International Conference on Finance and Banking (pp. 197-208). Praha, Czech Republic.
- Kolodiziev, O., Chmutova, I., & Lesik, V. (2018). Use of causal analysis to improve the monitoring of the banking system stability. Banks and Bank Systems, 13(2), 62-76.
- Korystin, O. Yе., Baranovskyy, O. I., & Herasymenko, L. V. (2008). Economic Security (400 р.). Kyiv: KNUVS.
- Kozmenko S., & Belova I. (2015). Peculiarities of identification of systemically important banks and assessment of their impact of the occurrence of economic crisis. Banks and Bank Systems, 10(3), 39-48.
- Krishnan, C., Ritchken P. H., & Thomson, J. B. (2005). Monitoring and Controlling Bank Risk: Does Risky Debt Help? The Journal of Finance, 60(1).
- Kusek, J. Z., & Rist, R. C. (2004). Ten Steps to a Results-based Monitoring and Evaluation System. Washington, DC: World Bank.
- Laker, J. F. (1999). Monitoring Financial System Stability. Reserve Bank of Australia Bulletin, 1-13.
- Leonov, S., Yarovenko, H., Boiko, A., & Dotsenko, T. (2019). Prototyping of information system for monitoring banking transactions related to money laundering. SHS Web of Conferences, 65, 04013.
- Ministry of Finance of Ukraine. (2019). Resilience rating of banks.
- Mörttinen, L., Poloni, P., Sandars, P., & Vesala, J. (2005). Analyzing banking sector conditions – how to use macro-prudential indicators (ECB Occasional Paper No. 26).
- Moskalenko, N. V. (2008). Problems of financial monitoring in the banking system. European Vector of Economic Development, 1(4), 66-71.
- Pershyn, V. H. (2016). Financial monitoring as an organizational and legal phenomenon: essence and principles. Comparative Analytical Law, 5, 216-218.
- Ryan, E. (2017). The Role of Macroprudential Indicators in Monitoring Systemic Risk and Setting. Quarterly Bulletin Articles, 2, 62-80.
- Sarlin, P. (2010). Visual monitoring of financial stability with a self-organizing neural network. In Proceedings of the 10th IEEE International Conference on Intelligent Systems Design and Applications (ISDA’10) (pp. 248-253). Cairo, Egypt.
- Slav’yuk, R., Shkvarchuk, L., & Kondrat, I. (2017). Financial market imbalance: reasons and peculiarities of occurrence in Ukraine. Investment Management and Financial Innovations, 14(1-1), 227-235.
- The State Financial Monitoring Service of Ukraine (SFMS). (n.d.). Statystychni dani shchodo otrymanykh Derzhfinmonitorynhom povidomlen pro finansovi operatsii protiahom IV kvartalu 2018 roku [Statistics on financial transaction reports obtained by SCFM during Q4 2018]. (In Ukrainian).
- Tobias, A., Covitz, D., & Liang, N. (2015). Financial Stability Monitoring. Annual Review of Financial Economics, 7, 357-395.
- United Nations Development Programme (UNDP). (2009). Handbook on Planning, Monitoring and Evaluating for Development Results. NY: UNDP.
- Vlcek, W. (2011). Global anti-money laundering standards and developing economies: The regulation of mobile money. Development Policy Review, 29(4), 415-431.
- Yahya, A. T., Akhtar, A., & Tabash, M. I. (2017). The impact of political instability, macroeconomic and bank-specific factors on the profitability of Islamic banks: an empirical evidence. Investment Management and Financial Innovations, 14(4), 30-39.