Equity risk of Ukrainian banks in the context of GIPS standards

Abstract

Background. Deepening of the risk understanding and methods of its calculation and control has been one of the main trends in financial industry during eight post-crisis years. Equity risk is one of the main components of risk of stock companies. For example, the evaluation of this risk can be one of the most important indicators of the bank activity, although its calculation is not required by the National Bank of Ukraine. Definition of equity risks faces the problem of incompleteness and inaccuracy of stock data on the stock market of Ukraine.
The analysis of recent researches and publications. Theoretical basis of the calculation of investment risk (including equity risk) were laid in the second half of the last century in the works of H. Markowitz, William Sharpe and others. The evidence of the maturity of these approaches is the development of "The Global Investment Performance Standards (GIPS)" and "Generally Accepted Risk Principles (GARP)". But on developing markets, including Ukraine, the definition of equity risks actions faces the problem of incompleteness and inaccuracy of stock data.
The aim of the article is to calculate the equity risk of Ukrainian banks.
Materials and methods. Primary data of the agreements with the shares of Raiffeisen Bank Aval, Kredobank, Ukrgazbank, Ukrsotsbank, historical significance of stock indices of First Stock Trading System (FSTS) and the indices of Ukrainian shares became the material for the research. Among the methods of scientific research which were used by the author for the processing of primary data of Ukrainian banks is statistical method. The analysis gave the opportunity to consider the achievements of investment theory and the requirements of the international standards in the sphere of investment.
Results. The work presents the opportunity of the evaluation of the equity risk (systematic and individual) of Ukrainian banks according to the requirements of "The Global Investment Performance Standards (GIPS)" and "Generally Accepted Risk Principles (GARP)". Risk calculations are made on the basis of Modern Portfolio Theory (MPT) for the shares of Raiffeisen Bank Aval, Kredobank, Ukrgazbank, Ukrsotsbank in comparison with the Ukrainian stock market indices: FSTS and the indices of Ukrainian shares.
Conclusion. Shareholders, potential investors and regulators can use the calculation method and received data.