Bielova I., Doctor of Economics, Associate Professor, Professor of the Department of Finance, Banking and Insurance, Scientific-Educational Institute of Business Technologies «UAB», Sumy State University, Sumy, Ukraine

ORCID ID: 0000-0002-9567-0132
e-mail: i.bielova@uabs.sumdu.edu.ua

Didyk O., Graduate Student of the Department of Finance, Banking and Insurance, Scientific-Educational Institute of Business Technologies «UAB», Sumy State University, Sumy, Ukraine

e-mail: didyk.olexiy@gmail.com

Nilova N., PhD (Economics), Associate Professor, Associate Professor of the Department of Socio-Economic Disciplines, Sumy branch of the Kharkiv National University of Internal Affairs, Sumy, Ukraine

ORCID ID: 0000-0003-2383-8247
e-mail: nilova.nataliia@gmail.com

Capital Tools and their Impact on the Level of Financial Stress in EU Countries

Introduction. Macro-prudential regulation tools are increasingly being used in different countries (to mitigate the effects of future crisis events) as one of the possible elements of achieving financial stability.

On the eve of the upcoming financial crisis, the fact of which is cyclical in nature, the question of the effectiveness of macroprudential instruments used in practice, is on the agenda for many countries (capital instruments, liquidity, leverage, etc.).

Macroprudential regulation tools include banks’ capital requirements, including Level 1 and others.

Purpose. Investigate the effectiveness of such a macro-prudential policy tool as capital requirements (Tier 1 standard), based on statistics in  28 countries of European Union from 2007 to 2018, to assess the feasibility of using this standard in Ukraine.

Results. The purpose of this article is: to examine the effectiveness of such a macro-prudential policy tool as capital requirements (Tier 1 standard) based on statistics from 28 European Union countries for the period 2007 to 2018, to assess the feasibility of using this standard fully in Ukraine.

The dynamics of the Tier 1 standard and the financial stress index in the European Union countries are analyzed. Hypothesis tested: Does Tier 1 affect on the level of financial stress in EU countries? The hypothesis is validated using the Difference-in-Differences method, and the significance of the model was checked by statistical criteria.

Comparison of existing standards Tier 1 (regulatory requirements of the European central bank) and H2 (regulatory requirements of the Ukrainian central bank) was performed; significant differences in the quality of capital requirements under these regulatory requirements were identified.

Conclusions. Taking into account our results, namely, the reduction of the financial stress level after the implementation the Tier 1 standard by the EU countries, we emphasize the feasibility of implementation  this standard in Ukraine as well, since since it is accompanied by a reduction in the level of financial stress and also focuses not on the amount of capital but on its quality.

Keywords: macroprudential policy; Tier 1; financial stress index; banking sector; regulatory capital.

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