Oryekhova K., Ph. D. (Economics), Associate Professor of the Finance, Banking and Insurance Department, Kharkiv Educational and Scientific Institute of SHEI “Banking University”, Kyiv, Ukraine

ORCID ID: 0000-0003-0214-2750
e-mail: kate.orekhova2010@gmail.com

Kostyukov O., Master’s Degree Student, graduate student of «Finance, Banking and Insurance» educational and professional programme, Kharkiv Educational and Scientific Institute of SHEI «Banking University»

The Essence of Bank Capital and the Features of its Formation in Ukraine

Abstract. Introduction. One of the important problems in the development of the modern period of Ukrainian economy is the improvement of banking activity. It is especially used formatting and using financial resources. They are the basis on which further banking is based. This is because the processes of formatting financial resources and lending are closely interconnected.

Purpose. The purpose of this publication is to deepen the understanding of the essence of banking capital and to summarize the legal support for their formatting in the current conditions in Ukraine.

Results. Summarizing the different approaches, the following definition of bank capital can be formulated: “Bank capital is cash flows from different sources (equity, borrowed), which is reflected in the forms of equity and borrowed capital, as well as revenues that are formed by the bank to meet the financial needs of economic entities, fulfillment of financial obligations of banks, reimbursement of costs for attracted resources and profit-making”.

Conclusions. An important component of a bank’s financial resources is equity, represented by share capital, various reserve and insurance funds, as well as retained earnings. Capital is the main type of bank liabilities to depositors. This is reflected at the bank ‘s financial sustainability level. Its role is therefore undeniably confirmed by the functions of capital it performs (protective, operational, regulatory, incentive, and others). In Ukraine, three basic standards of banking capital are used to regulate the own funds base: minimum regulatory banking capital (S1); adequacy of regulatory capital (S2); capital sufficiency (S3). Banks must stick to each to provide banks with financial stability. Also, additional buffer capital (conversion buffer, countercyclical buffer and system buffer) will be introduced to ensure the bank ‘s financial stability reserve from January 1, 2020. Their main task is to create a “pillow” to stabilize the financial condition of banks in times of recession and crisis. Prospects for further research are to find approaches for increasing the bank’s resource base in unstable economic conditions in Ukraine.

Keywords: bank, finance recourses, bank capital, economic standards, regulatory capital, main capital.

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