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QUALITY OF STATE REGULATION’S INFLUENCE ON UKRAINIAN FINANCIAL SERVICES MARKET

Автор Доклада: 
Bojarko I. M., Deyneka O. V., Hrytsenko L. L.
Награда: 
QUALITY OF STATE REGULATION’S INFLUENCE ON UKRAINIAN FINANCIAL SERVICES MARKET

UDC 336.76:351.72](477)

QUALITY OF STATE REGULATION’S INFLUENCE ON UKRAINIAN FINANCIAL SERVICES MARKET

Bojarko Iryna Mykolajevna, PhD
Deyneka Olga Valerijevna, PhD
Hrytsenko Larysa Leonidivna, PhD
State Higher Educational Institution “Ukrainian Academy of Banking of the National bank of Ukraine”

Researched the essence of concept and determined peculiarities of forming quality of state regulation’s influence on financial services market, suggested the method of its rating. Presented the results of method’s testing, based on statistical data, about activity and effectiveness of controlling and regulatory actions on the financial services market of Ukraine and dynamics of its development.
Keywords: financial services, financial services market, state regulation, quality, influence, rating.

Effectiveness of financial sector’s state management depends on many factors and components. Conformity of financial services market state regulation with needs and interests of its subjects, strategic objectives of market mechanisms development, institutional architecture and creation of appropriate conditions for formation of balanced market conjuncture, plays an important role in its ensuring.

The initial condition of forming the rating method of quality of state regulation’s influence on development of financial services market is clear understanding of concept’s essence that corresponds to the object of such rating. It should be mentioned that in science literature there is not enough attention paid to working out the analysis of management’s quality, which shows the results of research of different management problems’ aspects. Such scientists as N. Anatovych [1], S. Batchykov [2], S. Glazyev [2], V. Dunne [3], M. Lendel [4], D. Lyapin [5], V. Romanov [6], I. Salman [7], A. Chemerys [8], A. Yuldashev [9] and others touched upon some questions of state regulation’s quality in their research works. But in existing economic literature there is not enough attention paid to the development of rating method of state regulation’s influence on financial services market progress, which is directed at optimization of controlling and regulatory functions assigned to authorized bodies. This is manifested as the absence of a clear explanation of this term and understanding the mechanism and factors of formation of the quality of state regulation’s influence on financial services market and as the absence of indexes system and applied methods of its rating. As a rule, methods of mathematical statistics, illegible calculations and games theory are used for this purpose. Separate approaches, which are interesting from the position of possible development of scientific and methodic principles of management systems’ quality rating, are also presented in technical literature [2].

To our opinion, complex rating instrument mentioned above is quite toilful, which makes its using irrelevant in evaluation process of quality of state regulation of financial services market. The objective point of this research is development of analysis instrument of quality of state regulation’s influence on Ukrainian financial services market.

The essence of “quality of state regulation’s influence” is closely connected with content of “quality of management” concept. In economical literature it is defined through “set of processes” features that are occurring in management system and providing the effective operating of the whole system in general”.

While studying the quality of state regulation, it’s necessary to take into account that characteristic of mechanism’s of state regulation features includes structure-organizational and effective aspects. First one reflects formation’s specific of the mechanism’s structure, correlations between its structure elements, which provide effective financial market services operating via clear and purposeful cooperation within the processes of lawmaking and law enforcement. The second one, in its turn, characterizes consequences of using different forms and methods of financial services market’s state regulation from the position of goal achievement degree.

To our opinion, using term “quality of state regulation’s influence” in reference to this object is more appropriate, taking into account that state management of financial services market provides limited direct state interference into formation of market conjuncture and active use of self-control mechanisms.

In a basis of scientific and methodological principles of quality of state regulation’s influence on financial services market we put following basic statements. Firstly, regulation function as a management’s type is based on availability of feedback between the management and managed subsystems. That’s why, operating of the mechanism foresees monitoring which is the basis for systematic and continual collection, analysis and use of information about financial services market operating for its purposeful correction, according to the strategic goals and aims of social-economic development. Secondly, periodic rating of mechanism, which foresees relevance determination of carrying out control-regulatory procedures, their effectiveness from the point of achieving long-term and short-term goals of state economic policy, is needed. Thus, rating of influence quality is – totality of analytic means of studying and measuring real results of state policy realization in definite sphere, which allows defining, to what extent the activity of state institutions correspond proclaimed national goals.

Quality of state regulation’s influence is a complicated concept and, as a rule, rating of such quality can be characterized only by complex index. To our mind, indexes, change tendencies of which are controlled by Commission of Financial Service Markets Regulation, can be fundamental indicators of financial service market development. Accordingly, generalizing index of development can be presented as geometric mean of growth tempo of financial market services subjects’ number, cost of their assets and amount of rendered services:

(1)where IDL -integral index of financial services market’s development level;
CSA - coefficient of financial services market subjects’ amount growth, which shows how much times amount of financial services market subjects have changed for the analyzed period, units;
CАC - coefficient of assets’ cost growth, which characterizes assets’ value of financial services market subjects that accounts for 1 monetary unit of a similar amount of assets in the base period, units;
CPSA - coefficient of provided services’ amount growth, which demonstrates how much times provided services’ amount has grown, units.

Efficiency of state regulation mechanism can be particularly evaluated on the basis of indexes that show activities’ levels of state financial services market regulation and effectiveness of control function fulfilled by it. At the same time it is necessary to take into account that the main criteria among mentioned is activity level of state financial services market regulation, because it characterizes effectiveness of practical implementation of instruments of this mechanisms’ direct influence.

It should be determined as the geometric mean of growth indexes’ coefficients, which show intensity of application of regulatory measures and instruments. Taking into account available statistic data, activity level of state financial services market regulation can be calculated via such formula:

(2)where LSR – activity level of state regulation, units;
CNLA – growth coefficient of developed and adopted normative legal acts, units;
CNLG – coefficient of growth in the number of licenses granted, units;
CCV – growth coefficient of conducted verifications, units;
CEM – growth coefficient of enforcement measures taken after the appropriate verifications.
Level of state regulation can be characterized as active if the result is more than 1. If the result is less than 1 it means that level of state regulation is decreasing.
In its turn, relation of enforcement measures taken to the number of conducted verifications can be used for the evaluation of conducted verifications of legislation compliance by the financial services market subjects:

(3)where ЕCFI – effectiveness of control function’s implementation;
N – number of applied influence measures;
A – amount of conducted verifications.
On the basis of calculation of efficiency of implementation the control function it is possible to set up expediency and effectiveness of supervisory activity by the appropriate regulator. Effectiveness of control function’s implementation (taking into account, that it would assist detection of the violation of legislation and so on) will be provided upon the reason that amount of verifications will be less than implemented influence measures (index must be more than 1).

The correlated analysis which was held with the help of the Microsoft Excel shows the availability of the strong connection according to the Chaddock’s scale between the level of the financial services market’s development and the activity of state response (correlated coefficient accounts for 0,736) and moderate connection between the level of the financial services market’s development and the efficiency of the controlling function (correlation coefficient accounts for 0,370). Visually correspondence and differences are shown in the picture 1.

  • Pic.1 The comparison between the level of the financial services market’s development in Ukraine and the factors of its formation on behalf of the state control mechanism (personal calculation)
  • On the whole we suggest evaluating the quality of the state regulation’s influence on the financial services market using the algorithm. A structured logic model of the algorithm is given in the picture 2.
  • Pic. 2. Procedure for evaluating the quality of the impact of government regulations on financial services
  • According to the results of the regression analysis stochastic dependence between the level of the financial services market’s development and the state regulation’s influence can be described with the help of the equation written below:
  • IDL = 0,9913 + 0,2332LSR – 0,0080ECFI.

(4)The indices of the regression equation’s importance indicate that this equation represents 56 % of the factual variation of the resultant index change of the chosen factors. Besides, the natural rate of the financial services market’s development in Ukraine without taking the state regulation’s influence into account is only 99,13 %. In other words active state participation in the stimulation of the nonbank financial institutions that assign certain services causes the possibility of this financial market’s segment’s increase.

Interpretation of the equalization of pair regression which we have gotten allows us to draw conclusion that the increase of level of activity of government control on 1 % leads to the increase of the level of development of financial services’ market on 23 %. At the same time according to statistical data the efficiency of implementation of control function by the organs of government control of financial services’ markets makes the development of this sector be slowed down. Yes, the increase of amount of verifications and measures of influence leads to the decline of integral index of development of financial services market almost on 1 %.

The regressive function of dependence of development of financial services market on the level of activity of government control has such a kind:

(5)It has lower indexes of meaningfulness. It represents 54 % of actual variation of resulting index from the change of selected factor. At the same time the estimation of rejection in the values of parameters of equalizations of regression, which characterize natural level of development of financial services market with condition of absence of entertained factors action. This estimation allows to get the rough estimate of average annual size of current payment of efficiency of government control implementation of mechanism control function in a forming of general level of development of the market of financial services which is controlled by him. After our calculations it is 0,0106 units, or it is only 0,84% of the index of financial services market of Ukraine development in 2008.

It was made a rough estimate of mid-annual influence of state regulation activity on a level of development of the financial services market. It is 0,1877 units. Thus the regress equation in the conditions of an exception of consideration of influence of state regulation activity as factor of formation of a level of the market development looks like:

(6)It is necessary to notice that the values of the mid-annual expiration of factors which were received are only approximate and probable because regression models have a different significance value. At the same time considering to the absence of an adequate estimation toolkit of such influence in general we can make conclusion that it is possible to neglect the value in rough estimates of indicators.

The quality of state regulation influence on the financial services market as a whole can be differentiated on four kinds. It depends on character of mid-annual influence of state regulation activity and of control function efficiency on development of the financial services market. Quality of state regulation influence is corresponding to various types of the mechanism action:

  • - stimulating development: if influence is positive (positive size) for activity of state regulation, and for performance of control function;
  • - effective state regulation with sufficient activity: if influence on development of the financial services market is positive by the factor of control function efficiency and negative by the state regulation activity. Sufficiency of activity in this case is considered from the point of view of the possibility of maintenance of effective control by the state regulation mechanism of the market development condition;
  • - active state regulation with low efficiency: if influence on market development is positive for the action of the state regulation activity factor, but negative for the efficiency of control function performance;
  • - a decontrol: if state regulation activity and control actions efficiency leads to decrease of a level of the financial services market development.

The value of mid-annual influence of state regulation activity and of control function efficiency (0,1877 and 0,0106 accordingly) specify that the state regulation mechanism of financial services market in Ukraine has stimulating development character of action.

Thus, the scientifically-methodical approach which is offered by us allows to identify type of state regulation mechanism action of the financial services market, to define the basic directions of activity updating of controls. By results of a current condition analysis of the financial services market of Ukraine we get that the major factor of positive influence strengthening of state regulation on its development in modern conditions is creation of possibilities for increase of activity indicators of such regulation. It assumes the further perfection of the standard-methodical base for creation, registration, licensing, conditions of services granting, drawing up and granting of the reporting, of the transparency of financial institutions activity and their interaction with financial services consumers. As a result of such an improvement the necessity of carrying out of control checks and introduction of influence measures would decrease, which levels negative influence of low state regulation efficiency on a level of development of the domestic financial services market.

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