Incentives and restrictions of the bank's investments on Ukraine's stock market

S. Savytskyi

Economy and Forecasting, 2012, issue 3, 35-46

Abstract: The study aims to analyse banks' investment in securities during the post-crisis period and reveal the constraints accompanying this process. Grouping the banks by the portion of assets, invested in securities, we peculiar models of the banks' behaviour on the securities' market that differ by the levels of risk taken. Passive investment strategy, that implies less than 10% of securities' portfolio invested under the terms of merchant portfolio, is the most popular among banks. Based on historical analysis of banks' investment in securities, we make the conclusion that economic downturn is one of the factors of increasing the share of banks' securities portfolio in their assets. We find that risk level of bank's securities portfolio highly depends on the portfolio's share in the bank's as-sets. Based on this conclusion, it turns out that the banks of the third and fourth groups (percentage of assets invested in securities is less than 10% and 5% respectively) compile the main potential funds for investing in risky securities like corporate bonds and stocks. Among the main constraints accompanying the process of banks' investment in securities are: the size of securities' market, particularly, the absence of sufficient supply of investment-grade securities; high level of market concentration on both supply and demand sides (in particular government bonds and banks' funds respectively); and the absence of the opportunity to invest in foreign-listed securities.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eip:journl:y:2012:i:3:p:35-46

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