This article attempts to find answers to questions of current significance: How concentrated is Ukraine’s banking system from the viewpoint of the world’s best regulatory practices and in comparison with other countries? What has been the driving force behind the growing concentration in recent years and does this process pose a threat to competition in the banking system? What effect would mergers and acquisitions in the banking sector have on the concentration of the banking system? And finally, do public authorities have to stimulate consolidation in the banking system or, on the contrary, restrain potential bank mergers and acquisitions?
The results of empirical analysis dispel the persisting myths about the risks of fast and excessive concentration resulting from continuing market consolidation and about the substantial impact of inequality on the growing concentration, and refute the perceived danger of mergers and acquisitions in the banking sector. Instead, it was discovered that concentration of banking assets in Ukraine is not substantial according to the Herfindahl–Hirschman Index (HHI), CRn concentration index and other ratios. At the same time, in the conditions of continuing consolidation of the banking system via mergers and acquisitions and a decreasing number of banks, upward trends are observed within moderate, average European levels. Therefore, these new conditions require closer attention on the part of banking regulators to assess possible consequences of concentration.
This article provides recommendations to the National Bank of Ukraine (NBU) and the Antimonopoly Committee of Ukraine (AMCU) on how to improve monitoring of banking concentration processes and better regulate consolidation processes in bank mergers and acquisitions. A complex of preventive macroprudential measures was offered to offset the negative consequences of concentration and achieve an optimal degree of market consolidation.
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