Gonchar Kateryna, Postgraduate student of The Department of Banking, Odesa National Economic University, Odesa, Ukraine.

ORCID ID: 0000-0002-8350-3134
e-mail: sivkovak@ukr.net

Regulatory and Legal Framework of Operational Risk Management of the Bank

Abstract. Introduction. The basis of any state is the legal regulation of economic life. The work of banks should also be regulated by laws and regulations of the National Bank of Ukraine to ensure stable and uninterrupted work of banks, to protect the interests of all parties of economic relations of banking, as well as to ensure economic growth of all country.

Purpose. The purpose of the article is to analyze the legislative and regulatory framework of managing the operational risk of the bank.

Results. Banks’ operating activities require increased regulation due to their complexity and risk. The main legislative acts without which it is impossible to carry out banking activities are: the Constitution of Ukraine and special laws – the Law of Ukraine “About Banks and Banking”, the Law of Ukraine “About the National Bank of Ukraine”, etc. However, for a better understanding of the regulation of relations in the process of operational risk management of the bank, we divided the regulatory framework into three levels: meta-level – the external international regulatory framework, international recommendations for operational risk management in banks; macro-level – the external Ukrainian regulatory framework of the National Bank of Ukraine, the Laws of Ukraine governing relations in the field of operational risk management; micro-level – internal bank documentation, instructions governing operational risk management depending on the characteristics of a particular bank. Ukrainian legislation in the field of operational risk management uses international experience. The ratio of regulatory capital adequacy by two methods in accordance with Basel II and Basel III is calculated on the example of the banking system of Ukraine, the dynamics of this indicator is studied.

Conclusions. Basel III offers a more sensitive and simple operational risk approach. To improve the regulatory framework in the field of operational risk management requires: to establish the smooth operation of banks, ensure continuous monitoring and measurement of operational risk, all banks must report on operational risk events, need to conduct regular stress testing of operational risk.

Keywords: bank; operational activity of the bank; operational risk; regulatory framework; levels of regulatory framework of operational risk.

References:

1. About banks and banking activities (Law of Ukraine). № 2121-III. (2000). Retrieved from https://zakon.rada.gov.ua/laws/show/2121-14 [in Ukrainian].
2. About the National Bank of Ukraine (Law of Ukraine). № 679-XIV. (1999). Retrieved from https://zakon.rada.gov.ua/ laws/show/679-14 [in Ukrainian].
3. About prevention and counteraction to legalization (laundering) of proceeds from crime, financing of terrorism and financing of proliferation of weapons of mass destruction (Law of Ukraine). № 361-IX. (2019). Retrieved from https://zakon.rada.gov.ua/laws/show/361-20 [in Ukrainian].
4. About approval of the Regulations on the organization of accounting, accounting control during the implementation of operating activities in the banks of Ukraine (Resolution of the Board of the NBU). № 75. (2018). Re Retrieved moved from https://zakon.rada.gov.ua/laws/show/v0075500-18 [in Ukrainian].
5. Balyant, G., Priydu L. (2010). Regulatory framework for the functioning of banking institutions and areas for improvement. Ukrainian science: past, present, future, (14-15), 3-21 [in Ukrainian].
6. Regulations on the procedure for determining the minimum amount of operational risk by banks of Ukraine (Resolution of the Board of the National Bank of Ukraine). №156. (2019). Retrieved from https://bank.gov.ua/ua/legislation/ Resolution_24122019_156 [in Ukrainian].
7. About amendments to some normative legal acts of the National Bank of Ukraine (Resolution of the Board of the National Bank of Ukraine). №157. (2019). Retrieved from https://bank.gov.ua/ua/legislation/Resolution_24122019_157 [in Ukrainian].
8. Basel II: International Convergence of Capital Measurement and Capital Standards: a Revised Framework (2004). Retrieved from https://www.bis.org/publ/bcbs107.htm.
9. Basel III: A global regulatory framework for more resilient banks and banking systems (2011). Retrieved from https://www.bis.org/publ/bcbs189.htm.
10. Directive 2006/48 / EC of the European Parliament and of the Council on the taking up and pursuit of the business of credit institutions (2006). Retrieved from https://zakon.rada.gov.ua/laws/show/994_862/print [in Ukrainian].
11. Basic principles of effective banking supervision. Retrieved from https://bank.gov.ua/admin_uploads/article/pdf?v=4.
12. Sound Practices for the Management and Supervision of Operational Risk (2003). Retrieved from https://www.bis.org/publ/bcbs96.htm.
13. About approval of the Regulations on the organization of the risk management system in banks of Ukraine and banking groups (Resolution of the NBU Board), 64 (2018). Retrieved from https://zakon.rada.gov.ua/laws/show/v0064500-18 [in Ukrainian].
14. Methodical recommendations on the organization and functioning of risk management systems in banks of Ukraine (Resolution of the NBU Board). № 361 (2004). Retrieved from https://zakon.rada.gov.ua/laws/show/v0361500-04 [in Ukrainian].
15. Risk assessment system (guidelines approved by the Resolution of the NBU Board). № 104. (2004). Retrieved from https://zakon.rada.gov.ua/laws/show/v0104500-04 [in Ukrainian].
16. About approval of the Instruction on the procedure for regulating the activities of banks in Ukraine (NBU Resolution). № 368. (2001). Retrieved from https://zakon.rada.gov.ua/laws/show/z0841-01 [in Ukrainian].
17. Lobozinskaya, S. M. (2006). Legal regulation of banking activity in Ukraine. Scientific Bulletin of NLTU of Ukraine, (16.2), 190-194 [in Ukrainian].
18. Dmitrova, O. S., Goncharova, K. G., Merenkova, O. V., Medvid, T. A., Boyko, A. O. & Vakhnyuk, S. V. (2010). Modeling of operational risk assessment of a commercial bank. Sumy: UABS NBU [in Ukrainian].
19. Nabok, R. (2013). Some issues of operational risk management in banks. Bulletin of the National Bank of Ukraine, (1), 61-65 [in Ukrainian].
20. The main indicators of banks. Retrieved from https://bank.gov.ua/statistic/supervision-statist/data-supervision#2 [in Ukrainian].
21. Ferreira, S., Dickason-Koekemoer, Z. (2019). A conceptual model of operational risk in the banking sector. Cogent Economics & Finance, (7). https://doi.org/10.1080/23322039.2019.1706394.
22. Power, M. (2005). The invention of operational risk. Review of International Political Economy, (12), 577-599. https://doi.org/10.1080/09692290500240271.