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30ECONOMIC SCIENCES | ЭКОНОМИЧЕСКИЕ НАУКИ
ASSESSMENT OF RISK FACTORING OPERATIONS OF COMMERCIAL BANKS
Volokhova L.F.
Taras Shevchenko National University of Kyiv, Ph.D in Economics, Associate Professor of the Department of Insurance and Risk Management
Zakharenko V.V.
Taras Shevchenko National University of Kyiv, Student of the Department of Economics
ABSTRACT
The following research considers factoring risks and assesses the quality of portfolio risk groups for factoring loans. It provides a comparative analysis of the dynamics of the loan portfolio and the portfolio of commercial banks factoring transactions. The article proposes that the market of factoring services in Ukraine requires the creation of quality infraflructure.
Keywords: factoring; risk assessment; credit portfolio; factoring portfolio transactions; commercial banks.
Problem setting. At present times factoring is considered to be the mofl innovative credit service. Banking inflitutions use factoring schemes with some degree of fear as factoring funding continues to hide a major risk. Slow development of factoring in Ukraine could be explained by the difficulty in undemanding factoring, and more specifically, by insufficient acquaintance with the service at the Ukrainian market, association of credit, complicated bureaucratic procedures, unusual payment syflem, difficulty in self-flructuring operations, increase in the cofl of production. Factoring services emerged on the basis of commercial loans, which are granted by sellers to buyers in the form of deferred payment for goods sold. Changing requirements for the calculations in terms of acceleration of vehicles resulted in the need for providers to seek solutions to the problem receivables.
Factoring is a relatively new effective syflem which helps to improve liquidity and reduce financial risk while organizing payments. In practice, financial inflitutions, providing factoring services, are the largefl banks, providing high reliability factoring transactions and minimum cofl for cuflomers.
Analysis of the latefl researches and publications. An important contribution to the formation of theories and methods of factoring companies made our scientifls, S.L. Ash, O.H. Verenich, I.A. Vlasova, T. Yevlash, O.O. Zelenin, A. Kiyashko, V.M. Koflyuchenko, S.A. Kuznetsova, A.N. Levchenko, G.V. Misaki, O.I. Palchuk, N.S. Struk, O.I. Stupnytskyi, K.S. Surnin, A.V Tokunova, A.V. Fartushnyak, Y.O. Chapichadze; foreign scientifls: E. Dollan, J. Perrar, Mr. Rose, K. Shmitthoff, R. Campbell, M. Bikers, P. Biscoe, James. Gilbert, IA Gilbert, H.ZH. Zomer, A. Cox, Dzh.Mak-Kenzie, F. Salinger, M. Foreman, C. Hahenmyuler, A. Hann, J. Chesser. However, fludies of factoring business in their vafl majority, are isolated and no syflematic complex researchers of Ukrainian market have been conducted yet.
Some issues on mechanism of factoring operations in Ukraine have been considered in the works of Ukrainian scholars, including: A. Amelina, S. Bardash, M.I. Cooper, I.N. Vyhivskoyi, L.V. Gnylytsky, D.O. Hrytsyshena, Z.V. Hutsaylyuka, V.V. Evdokimov, R.O. Koflyrko, Ya.D. Krupka, V.I. Kuzya, O.A.
Ladovsky, I.D. Lazaryshenoyi, S.F. Lehenchuka, A.V. Minakova, A.V Nebyltsovoyi, G.P. Stadnyk; Russian scientifls: I.M. Ageev, O.R. Antyshevoyi, N.A. Horyslavets, A.S. Dzhanhetova, O.D. Dmytrychenko, L.M. Kozhin, A.V. Lebedev, A.S. Tolflova, VA. Tochylovoyi, V.A. Chemova, A.M. Shanin, A. Shevelev.
Research gap. Despite the exiting fludies of theoretical and practical aspects of conducting factoring operations in Ukraine, not enough attention is paid to analyzing the effectiveness of factoring transactions and their risk for commercial banks. It is crusial to explore the risks shadowing factoring in Ukraine and evaluate international experience in factoring activities and prospects of its implementation in Ukraine.
Research aim. The present fludy seeks to explore the riskiness of factoring operations of commercial banks and to show their advantages over credit transactions.
Research body. Factoring companies can be divided into two groups: a group of banking and non-banking financial inflitutions. Activities factoring company as a flructural part of banking inflitutions determine the specifics of your display factoring operations, cash flows and eflimated discipline. As for the companies that are the subject of our fludy, that is, non-bank financial inflitutions, the problem of formation of accounting and analytical support are related to other subjects of the financial market (leasing companies, credit inflitutions).
Activities factoring company that is not a bank financial inflitutions, characterized by independence and its directions aimed at executing finance, management, control, settlement, security, guarantee, encashment, collection functions and responsibilities taking risks.
Thus, given that factoring can make as bank and nonbank financial inflitution under the factoring business should underfland the activities related to the provision of factoring services, carried out by departments, units (subsidiaries, branches) financial inflitutions and financial inflitution separately.
The features of the formation of allowance for factoring transactions is measured only maturing obligations. By factoring risk include three risk groups:
- flandard - indebtedness on which matures (return), provided the agreement has not yet come (hazard ratio 2%);
- queflionable - there are arrears on operations for up to 90 days (hazard ratio, 50%);
- bad - overdue term debt over 90 days (hazard ratio 100%). The following indexes are used to assess the quality of
loan portfolio from the point of view of factoring risk: quality index, non-performing factoring loans ratio, and bad factoring
Portfolio quality analysis by factoring
loans ratio. For example, quality index could be measured as a correlation of the monetary equivalent of factoring loans, weighted to the risk level, to the monetary equivalent of all factoring loans.
On the basis of the following data we have calculated the quality factoring portfolio of PJSC «Ukrsotsbank». Through the calculations was determined by factoring the amount of credit risk weighted (tab. 1).
Table 1
loans risk groups of PJSC «Ukrsotsbank»
Groups factoring credit risk Standard Doubtful Bad Total
2011 p. Total factoring loans thousand. UAH. 153903 34245 17965 206113
Risk ratio,% 20 50 100 x
Total factoring loans, risk-weighted 30781 17123 17965 65869
2012 p. Total factoring loans thousand. UAH. 114382 33609 14248 162239
Risk ratio,% 20 50 100 x
Total factoring loans, risk-weighted 22876 16805 14248 53929
2013 p. Total factoring loans thousand. UAH. 91 540 25 758 15 247 132 545
Risk ratio,% 20 50 100 x
Total factoring loans, risk-weighted 18308 12 879 15 247 46 434
2014 p. Total factoring loans thousand. UAH. 98 356 32 588 5 833 136 777
Risk ratio,% 20 50 100 x
Total factoring loans, risk-weighted 19 671,2 16 294,0 5 833,0 41 798,2
2015 Total factoring loans thousand. UAH. 95586 28142 7 440 131168
Risk ratio,% 20 50 100 x
Total factoring loans, risk-weighted 19117,2 14071 7 440 40628,2
Source: compiled by the author based [3] Quality Score factoring portfolio of loans is given in the Table. 2.
Analysis of factoring loan portfolio quality of PJSC «Ukrsotsbank» in terms of risk
Table 2.
Indexes 2011 2012 2013 2014 2015 Absolute deviation 2015/2014
1. The coefficient factoring loan portfolio quality 0,319 0,332 0,350 0,306 0,310 0,004
2. The share of non-performing loans to total loans factoring% 0,087 0,088 0,115 0,043 0,057 0,014
3. The share of problem (outstanding) Factoring loans% 0,166 0,207 0,097 0,119 0,107 -0,012
Source: compiled by the author based [3]
These data indicate a fleady downward trend in credit quality of factoring portfolio. The growth of the firfl factor suggefls reducing risk factoring operations. Its value is 3.1%. The share of non-performing loans also increased from 4.3% to 5.7%. Inflead, factoring loan portfolio share of overdue loans decreased
by 1.2% and at the beginning of 2016 was 10.7%, that is a third of all factoring loans. Increased risk factoring transactions led to addressing the scale of the bank in this direction. It is necessary to take into account the degree of risk of these operations during inflation rates for this type of banking services.
Оn practice, the actual cofl of factoring services consifls of two parts: the nominal annual interefl rate for factoring financing and various fees for factoring services. Among these, the following fees may be charged: management fee (0.2% of the limit), the Commission for the eflablishment factoring limit (0.5-2% of the limit) and service fee (0,2-2% of proceeds) [1].
As a base rate factoring as a percentage per annum by 2015 it significantly increased and the average increased by five percentage points good - reaching a level of 27% in banks factors and 31% in factoring companies (the difference is that usually lafl no «fee for service factoring limit,» which is often the banks). Note that factoring rates sometimes exceed the rates on bank loans (Fig. 1).
Fig. 1. The dynamics of interefl rates and rates on factoring in 2014-2015,% Source: compiled by the author based [1]
In modern Ukrainian banking practice banking relationship with cuflomers primarily based on the use of credit agreements (compared to factoring). This is due primarily to the fact that credit - especially banking, which was worked centuries, and the use of new (factoring) relations, even if the use of foreign experience, can pull an increased risk for new services. There is also a lack of awareness of cuflomer experience and banking
experts in matters of factoring, which can also provoke banking risks.
Analysis of the volume of factoring transactions compared with credit executed in the table 3. It shows that for the period 2013-2015 the loan portfolio of the bank was far greater than the volume of its factoring portfolio. While the rate of growth of the loan portfolio was 112.07%, the negative growth rate of the portfolio of factoring transactions amounted to 92.8%.
Table 3.
Volume of the loan portfolio and the portfolio of factoring transactions PJSC «Ukrsotsbank» in 2011-2015.
Year The credit portfolio, thousand. UAH The credit portfolio, thousand. UAH The growth rate credit Portfolio ,%to 2013. The growth rate portfolio factoring transactions % to2013 The difference between the growth in factoring and credit portfolios (stp.5 - stp.4),%
2011 29 471 264 206 113 X X X
2012 25 440 872 162 239 86,32 78,71 -7,61
2013 27 544 544 137 815 108,27 84,95 -23,32
2014 28 991 528 199 340 105,25 144,64 +39,39
2015 32 490 498 184 952 112,07 92,78 -19,29
Source: compiled by the author based [3]
In order to minimize risk, banks often turn to insurance companies. However, in mofl cases, banks insure only deal with non-recourse factoring, factoring in the case of regression credit risk or liquidity risks remain for the client. In this situation, the supplier may apply in person to the insurance company and insure their credit risks. In Ukraine, insurance services commercial loans offer «Insurance Group» TAS «,» guarantee «,» Insurance «Providna.»
The object of insurance of credit risks in factoring is the property interefls of factors related to the possibility of losses as a result of failure of the debtor obligations under the supply agreement. Franchise is the proportion of outflanding debt the
debtor for goods delivered or services rendered, which bear factor in case of default of payment. Typically, the amount deductible hovers around 10% - 20% and depends on the quality of receivables.
In addition to the factors, insurance company also analyzes the debtors and sets them their credit limit, which is the maximum possible size of debt per debtor that can be insured by the insurance company. Among the benefits of trade credit insurance factor can be identified the following[2]: 1) the ability to accept service factoring portfolio with a wide range of debtors; 2) the ability to provide cuflomers factoring services with a higher limit on a debtor; 3) limiting credit risk factoring
portfolio; 4) minimizing the cofl of evaluating and monitoring the solvency of debtors.
In addition to these benefits, the important feature of trade credit insurance is that, along with compensation for direct losses, the insurer mufl provide qualified service credit management factor.
In the ranking of problematic loan portfolios Forbes analyzed the performance of the 31 largefl bank in the firfl two groups according to NBU classification, that are active in the credit market. The total amount of loans to these financial inflitutions is 84% of the total loans of the banking syflem.
The top five banks in problematic loan portfolio includes UniCredit Bank, Delta Bank, Ukreximbank, Raiffeisen Bank Aval and Ukrgasbank. Rankings have high volume and share of non-performing and non-performing loans, the rapid growth of troubled assets or low cover bad loans provisions for credit risks.
Conclusion. Summing up, it is worth noting that despite the risks of exiting factoring, it has good prospects and could become very popular among domeflic enterprises. However, if in the future factoring is seen as a debt service financing, it
will be difficult to compete with traditional banking services. In such circumflances, factoring services market in Ukraine needs to create quality infraflructure, an important element of which is insurance. When factoring the effective organization and syflem factors interact with other members of the financial services market, factoring can be a catalyfl for rapid development of domeflic business.
References
1. Analytycheskaya note on the conditions of service factoring lyzynhovoho and juridical persons krupneyshyh banks in Ukraine. - K .: Proflobank Consulting, 2015. - 26 p.
2. Regulations (flandard) accounting №13 «Financial Inflruments»: by the Minifliy of Finance of Ukraine of 30 November 2001 r. №559 [electronic resource] / National Bank of Ukraine - Access: http://zakon.rada.gov. ua
3. Annual report of PJSC «Ukrsotsbank» in 2015 // www. unicredit.ua
ROAD MAP OF ELECTRICITY EXCHANGE MARKET DEVELOPMENT AS A NECESSARY CONDITION FOR ENERGY SECTOR LIBERALIZATION
Bolkvadze N.I.
Ternopil National Economic University
Ukraine
ABSTRACT
In this paper the new laws and bills of electricity market development in Ukraine were analyzed as well as their conformation to the European flandards. The undereflimated role of energy exchange in market prices formation for energy resources during the reform process was shown. The Road Map of electricity exchange market development in Ukraine, including three successive flages, was developed. A theoretical model of electricity market of Ukraine was proposed. It provides separation between the syflem operator activities and commercial activities and market segment formation as energy exchange. This allows to provide pricing transparency that is especially relevant nowadays.
Keywords: energy exchange, electricity market, liberalization, clearing, congeflion management.
Problem flatement. Electricity market cannot be ideal as it is specified by a large number of participants, rules and laws, regulating and influencing on it. The demand for the efficient market of energy resources led to the profound flructural changes in generation, diflribution and sales. In the EU these processes took place in the 1990s and now the liberalized electricity markets tend to integration or to the close relationship between each other.
Such extremely close cooperation becomes possible not only due to the integration of electricity transmission lines between neighboring countries that provides secure and continuous national electricity grids functioning, but also due to the tefling of different trading schemes in energy sector.
In order to determine the components of the efficient electricity markets in Europe, their organization and flructure should be considered. According to the conducted analysis, energy exchange, trading gas and electricity, plays one of the important roles in the development of a liberalized European market. Energy exchange is involved in solving of the problem of power intersyflem transmission lines overload as well as in international trade and integration of energy markets. In Ukraine market liberalization and development have jufl begun. Thus, the legislative framework is being developed now (new laws and legislative acts are being adopted). For example, the concept of
energy exchange is not mentioned in the Law of Ukraine "On electricity". Thus, the fludy of its role is especially topical today.
Analysis of recent researches and publications. The issue of energy exchange market development and functioning and its impact on the economy is being thoroughly invefligated by foreign scientifls in European countries, among them are: F. Benth, R. Bigler-Konig, R. Kissel [1], P. Falbo, M. Fattore, S. Stefani [2], G. Zachmann [3], E. Wagner, F. Virle [4].
In Ukraine this issue is relatively new. Ukrainian researchers focus mainly on the fludy of general organization and functioning of energy markets. Among them are A. Kirilenko, I. Blinov, G. Korkhmazov, V Popovich [5]. They fludy the harmonized role model of a competitive European electricity market and possibilities of its adaptation to the wholesale electricity market development in Ukraine. Scientifls focus on the issue of energy derivatives and their efficient functioning on the domeflic energy market. According to O. Riabchenko [6], in order to solve the problem of energy derivatives implementation, it is necessary to juflify the choice of financial tools and provide the appropriate conditions for their efficient application. However, he does not subflantiate the fact that these derivatives as futures contracts can only be exchange-traded. O. Sokhatska and N. Strelbitska consider the energy derivatives application of famous foreign exchanges, as the price risk management tools of the domeflic refineries [7].
