Transformation of Bank Capital Regulation in Ukraine: the Role of Institutional Distortions

It is shown that reforms of banks regulatory requirements in Ukraine take place in global context of changes in banking regulation under Basel III implementation. It is proved that Basel III implementation helps not only to enhance financial stability but also solve plenty of problems related to institutional weakness. The fact of fundamental undercapitalization of Ukrainian banking system is shown as well as inability of such system to be resistant against NPL hikes even in time of formal suitability to formal regulatory norms. This confirms fact that previous banking regulation model was “blind” and unable to react adequately to institutional distortions. It's shown that Basel III implementation in Ukraine all together with risk-oriented bank supervision first of all are addressed to institutional challenges that make procyclicality and risk concentration problems more radical.