№ 8/2016

Fìnansi Ukr. 2016 (8): 38–

MARKET OF FINANCIAL SERVICES

KOZIUK Viktor ¹

¹West Ukrainian National University
OrcID ID : https://orcid.org/0000-0002-5715-2983

Related lending: oligarchic banking and financial instability

Financial instability and politically motivated bank assets stealing is considered as a dominant risk of related lending. It is shown that financial instability appears to be the consequence of collective bias towards the situation when benefits of “looting strategy” exceed benefits of bank recapitalization. It is stressed that related lending is in the core of oligarchic banking in Ukraine determined by weak property rights and high costs of borrower monitoring outside of a particular political business-group. Lenders and borrowers ownership offshoring is the way of adjusting legal regulatory restrictions to insider relations. It is proved that financial instability in Ukraine is determined by the situation when a large number of bank-owners benefits from opportunistic outsiders expropriation exceed benefits of recapitalization of the banks. The price stability policy, reduction of fiscal pressure, banking supervision modernization as well as reforms towards an increase in quality of appropriate institutions should put forward the transformation of the banking system.

Keywords:related lending, financial instability, oligarchial banking, quality of financial institutions, insiders relations, offshoring.

JEL: G21, G28, G29.

KOZIUK V. . Related lending: oligarchic banking and financial instability / V. . KOZIUK // Фінанси України. - 2016. - № 8. - C. 38-.

Article original in Ukrainian (pp. 38 - 58)

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