Capitalization of banks: theory, practice and directions of ensuring
Capitalization of banks: theory, practice and directions of ensuring

Summary/Abstract: In the article, the essence of the concept of a banking institution “capitalization” is revealed. The current state of capitalization level of domestic banks is investigated. The directions of strengthening the capitalization are offered, which will increase the com¬petitiveness of domestic banking institutions in the world financial market and will ensure the national economy stability on the way toward integration into the world economy.It is proved that the prospects for the development of any bank are largely determined by its capitalization level. Lack of proper development inhibits both individual banks and the banking sector as a whole.In the context of the recent financial crisis, the provision of sufficient capital for banks has been one of the key issues, because the lack of capital was the greatest threat to the banking system stability. With this in mind, the issue of the banking system capitaliza¬tion is particularly topical.Today, the development of the Ukrainian banking system under economic instability has faced the increase in competitiveness of domestic banks compared with foreign ones, in order to preserve the national priorities of the banking system in general under conditions of foreign capital movement.The processes of concentration in the banking system of Ukraine are analyzed using Herfindahl-Hirschman index in terms of assets and equity, allowing to estimate the level of monopolization and, therefore, the impact on economic development. To con¬sider the increase in the level of capitalization and reliability of the banking institutions of Ukraine, it would be advisable, first of all, for banks to improve the quality of capital and to ensure a sufficient level of coverage of risks taken by banks.

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