Harmonisation of regulatory capital formation procedures for Ukrainian banks with EU law: Regulatory limits and legal discrepancies

Анотація

The study aimed to assess the compliance of Ukrainian rules for capital recognition and adjustment with EU logic to identify the source of differences in actual capital outcomes. The methodology included regulatory and comparative legal analysis combined with functional comparison, structural-logical modelling (comparative matrix) and content analysis of public reporting, which established Ukrainian high convergence with the EU model in the own funds structure according to the prudential outcome criterion and outlined areas of divergence. The study established that the special legal regulation of the EU and Ukraine defines capital as the main safeguard that ensures the absorption of losses in the banking system. The European regulatory framework focuses on the quality of capital and ensuring equal risk measurement between different banks. The Ukrainian legal framework is undergoing active harmonisation with EU law to ensure comparable sustainability results. The analysis determined that Ukrainian banking law demonstrates a high degree of convergence with European law in terms of the distribution of capital between core and supplementary levels. The main differences between the European framework and Ukrainian rules lie in the technical calibration of thresholds and exemptions for capital deductions. Ukraine’s regulatory framework for banking groups is less detailed than the corresponding standards in the EU. European legislation contains mechanisms that limit the ability of banks to understate capital requirements through internal models. The introduction of the European regulatory framework directly changes the risk behaviour and credit policy of banking institutions. Ukrainian legislation should focus on procedural convergence and the unification of reporting in line with EU standards. The practical significance is determined by the possible use of results by the National Bank of Ukraine, legislators and banks to improve regulatory procedures and reporting and to increase the comparability of prudential results with the EU regime

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