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INTRODUCTION OF FOREIGN EXPERIENCE IN THE SYSTEM OF STATE REGULATION OF THE FINANCIAL SECTOR OF UKRAINE'S ECONOMY
Denysiuk Oleksandr Vasylovych, external PhD student
Ukraine, National University of Civil Protection of Ukraine, Training Research and Production Center
ABSTRACT_
Problem setting. The relevance and necessity of the theoretical study of the state's role in regulating the financial sector of Ukraine's economy is preconditioned by several factors. First, high-quality, well-regulated financial market reduces the overall risk which investors associate with a particular country, secondly, high-quality, well-regulated market is an indispensable tool for engaging the entire savings of the population in the process of economic development, thirdly, the high quality of the financial market increases the dynamism of the system and its reputation that is really important to ensure that the population will gradually approve the transition to the market economy, and, fourthly, the real situation in the financial sector of the Ukrainian economy against the background of the global financial crisis is currently deteriorating with the progressive pace. Recent research and publications analysis. A significant contribution to the study of the theoretical issues and the development of certain aspects of the state regulation of the financial sector of the economy from the standpoint of improving the financial security of its activities has been made in the works of leading scholars and practitioners
The paper main body. In the article the current problem of introduction of foreign experience in the system of state regulation of the financial sector of the economy was analyzed. On the basis of the economic systems and mechanisms of their improvements, the conclusions about implementation of the best positions in Ukraine were made. The methods of using the taxes as regulatory instruments that provide market participants with considerable freedom of action and strengthen the economy were considered. Conclusions of the research. On the basis of the analysis of domestic and foreign experience of functioning of the mechanism of state regulation of the financial sector in the system of economic security, the conclusion was made that the conditions for the emergence of the crisis phenomena were largely formed because of the use in the financial sector of many countries "The supervision system based on risk".
With the growing interpenetration of the economies of different countries, intensification of the international financial institutions activities, and transnational economic structures, the financial systems of the countries become extremely vulnerable that directly threatens not only economic but also national security in general.
Problem setting The relevance and necessity of the theoretical study of the state's role in regulating the financial sector of Ukraine's economy is preconditioned by several factors. First, high-quality, well-regulated financial market reduces the overall risk which investors associate with a particular country, secondly, high-quality, well-regulated market is an indispensable tool for engaging the entire savings of the population in the process of economic development, thirdly, the high quality of the financial market increases the dynamism of the system and its reputation that is really important to ensure that the population will gradually approve the transition to the market economy, and, fourthly, the real situation in the financial sector of the Ukrainian economy against the background of the global financial crisis is currently deteriorating with the progressive pace.
Further integration of Ukraine into the global world economy and the effects of a deep financial crisis in the country resulted in a number of serious economic problems in the real sector of the economy. There are large gaps of the socio-economic, investment and financial, organizational and technological nature, as well as the asymmetry in property relations, distribution, in the system of management. The
ARTICLE INFO
Received 7 February 2017 Accepted 15 February 2017 Published 10 March 2017
KEYWORDS
state regulation of the economy, national security, mechanisms of regulation.
© 2017 The Author.
dynamics of the economic processes of recent years show that the majority of adverse internal conditions of the industrial complexes development with relatively weak international positions of the national economy require: an active search for innovative ways of state regulation of the economy; formation and application of the tools of competitive national and regional economic system development.
Recent research and publications analysis A significant contribution to the study of the theoretical issues and the development of certain aspects of the state regulation of the financial sector of the economy from the standpoint of improving the financial security of its activities has been made in the works of leading scholars and practitioners [1; 2; 4; 5]
Paper objective is to analyze the mechanisms of state regulation of the financial sector of the economy and to study the foreign experience.
Paper main body The theoretical basis for the consideration of the issue of the degree of state intervention in the market economy is consistently presented in the views of the scientific schools which emphasize the theoretical justification of the intermediate forms of market economy from competition to monopoly.
Among internal threats to the financial sector of Ukraine the following can be distinguished:
1. General instability of the banking system, mainly due to the weakness of the domestic banks - low level of capitalization and inability to raise public funds through a permanent mistrust, bankruptcy of banks, the fictitious nature of the statutory capital, risky credit policy;
2. Relative weakness of the stock market which results in low capitalization, small volumes of trade, inefficiency of the capital reallocation - the isolation of resources mostly in the circle of the export-oriented companies and financial-banking sector, narrow range of financial instruments;
3. Lack of the efficiency of the budget system which emerged as a predominantly redistributive one, has a short-term basis, and does not allow implementing of the long-term economic development projects.
4. Significant capital outflow due to the uncertainty of its owners in the political course of the state, the illegality of the acquisition of funds by many businesses and individuals, the concealment of the tax revenues and the fear of possible expropriation of capital, protection against inflation, political stability in the countries-recipients of cash outflows;
5. Considerable gap between financial and real sectors of economy which is manifested in the lack of the long-term investments in industry and agriculture, the predominance of investments in intermediary and financial activities.
6. Large-scale criminalization of economy, corruption, connection of some officials of the state authorities with organized crime, the possibility of access of criminal organizations to the production control and their penetration in different power structures.
To effectively implement the state regulatory policy there is an urgent task to develop legislative acts regulating the processes of mergers and acquisitions in the banking sector, holding companies, providing control in the financial sector. The control by the antimonopoly authorities is required, in particular, with the legislative settlement of the issues of attracting foreign capital that seeks to create new private monopoly structures.
As noted earlier, the main features of the contemporary stage of the world economy development is the liberalization of foreign economic relations, strengthening of integrational and globalization processes in international financial and commodity markets due to the openness of national economies and cooperation in various spheres of economic activity. However, as confirmed by the events of the recent financial crisis, these trends can have not only positive but also negative effects on the country's economy. Thus, the openness of the national economy, on the one hand, contributes to the development and deepening of economic, industrial, financial, social, cultural and other relations between countries. On the other hand, it makes the economy more vulnerable to the impact of destabilizing factors of the relevant external environment, turbulence of the international financial and commodity markets and threats of the political and social nature. In other words, despite the powerful potential for the development of open economic systems in modern conditions of globalization and integration of markets, they are characterized by considerable volatility, unpredictability and risk.
Ukraine, like several other countries in Europe and Asia, is at the beginning of the process of economic structures reformation. For Ukraine, the functioning of the state mechanism of regulation is a necessary condition for the successful market system reform of the economy. Perhaps, in Ukraine there might be much broader scope of state regulation than in traditional market economies. However, this does not mean that the foreign experience can be rejected. On the contrary, it should be thoroughly studied and certain conclusions should be made. Our country does not have enough of its own experience of formation and use of the market system, thus, the practice of state regulation in
developed countries should be studied and applied. Learning and understanding of the experience will help to avoid repeating of many mistakes in the development of the economy [3, p. 56].
Historically there are two leading methodological approaches to the regulation of the market economy of the developed countries: the keynesian school (the theory of government regulation of the economic mechanism) and the synthesis of the neokeynesian schools, sometimes conservative, doctrines of laissez-faire in the economic life of society. These two theoretical schools have a common basis. They consider the state as a subject of economic system that has a certain property and economic functions for carrying out economic policies aimed at achieving the strategic goals of the society.
John. M. Keynes and postkeynesians believe that monitoring the conditions of the market parameters is one of the state (government) functions. Any non-equilibrium action must be registered on the basis of the built-in stabilizers and to be directed to the trajectory of the equilibrium balanced growth. In this way the government influences a particular market segment [5, p. 24]. It should be noted that Keynesianism is not heterogeneous in questions of the state regulation of economy. It splits into three main branches: the left (liberal), conservative, and neo-classical.
The left Keynesianism is seeking a way out of the contradictions of the modern economy by increasing government spending for public purposes: housing construction, health care, social security, road construction, etc., and also creation of conditions for income growth of the farmers, small businessmen and workers' salaries.
The conservative direction of Keynesianism relies on the state regulation of the economy mainly by maximizing the profits and preserving the conservative structure of the economy.
The neoclassical school and its representatives believe that through effective monetary and fiscal policy it is possible to integrate micro- and macro intervention of the state in determining the level of income of different population groups, coordination of investment policy, promotion of the progressive industries, etc.
The subjects of the state regulation are central, regional, municipal or communal governing bodies. The following types of government regulation are singled out:
- a complete state monopoly in managing the economy. It was typical for the Soviet Union and the socialist countries, but it still remains in some post-communist states;
- various combinations of the market and state regulators. Implemented in "Japanese", "Swedish" models, in the model of the socially oriented market economy of Germany, Austria and "Chinese" version of the development;
- extreme liberalism, which recognizes as effective only conditions of unlimited private enterprise. Mainly inherent in the United States economy [1, p. 77].
The efficiency of state regulation is determined by the presence of the strong legislative, executive and judicial state power. Implementation of the state financial policy in the leading foreign countries in the legal framework is mainly provided by the Ministry of Finance (Germany, Canada, Japan, Sweden, Poland, Hungary and other countries). The Ministries of Finance, called the State Treasuries, are functioning in the USA, UK and as the Ministry of Finance, Industry and Economy -in France. There are countries where several financial agencies function in the system of legislative and executive authority.
Two main models of state regulation through the certain government bodies are singled out.
1. Reactive (adaptive) model, typical for the United States. It allows accurately responding to the changes and "mistakes" of the market. This is ensured by the mobility of the structures and functions of the regulatory bodies, the variations of the leverage of direct and indirect regulation at the macro and micro level, a combination of different forms of joint activities of the state and private business.
2. Proactive model of government regulation (Japan) involves the prevention of possible failures in the market mechanism by "exact" dosage of government intervention, planning, coordination or corrective recommendations in the negotiations of the state and entrepreneurs [2, p. 127].
On the basis of the analysis of domestic and foreign experience of functioning of the mechanism of state regulation of the financial sector in the system of economic security, it should be noted that the conditions for the emergence of the crisis phenomena in 2007-2009 years were largely formed because of the use in the financial sector of many countries "The supervision system based on risk". This system is based on the fact that if a reliable subsystem of risk management is available and there is sufficient income and capital for its coverage, the financial institution may carry out almost any type of financial activities. In this case the regulatory authorities should only control the systems of risk management. The use of taxes as regulatory tools provides the market participants with the significant freedom of action but the effectiveness of tax measures can be quite high. With the differentiation rates of the "Tobin tax" depending on the level of risk associated with the operation,
one can adjust the development of individual segments of the financial market. Through the thought-out taxation, the benefits of the market participants can shift from high-yield and high-risk operations to the less profitable and risky tax rates which will be lower. The market participants will make decisions on a voluntary basis in contrast to the direct instruments through which these norms are obligatory for execution.
A similar effect on the largest American financial companies is supposed to be done by "the tax liability for the financial crisis". Taxes on bonuses, that were introduced in the UK and are offered for introduction in the US, also give the choice to the financial institutions [4, p.7]. However, in the future, the companies will probably think about a more conservative policy in the sphere of remuneration, in particular, they will abandon the practice of guaranteed bonuses which they are forced to pay even during the crisis periods. The Central banks are not mentioned often in the latest proposals to change the regulation: in the documents of the "Group of 20" which emphasize the necessity to combine their efforts to ensure stability and in the proposals for the regulation of the American banking sector.
The emergency assistance programs of the financial system and individual institutions are being gradually phased out, perhaps that is why the activity of central banks is becoming less noticeable. It should be noted that the instruments of monetary policy are extremely important for regulation of the development of financial markets: they create the preconditions for the crisis phenomena emergence or, conversely, contribute to the stabilization of the situation on the markets. Not accidentally, in many countries the discussion about the creation of a body regulating systemic risks and which will be responsible for the stability of the financial system as a whole, as one of the options considered granting such power to the Central Bank. Its tasks already include financial stability ensuring, it is directly involved in the market transactions and performs the functions of a lender of final recourse.
Conclusions of the research On the basis of the analysis of domestic and foreign experience of functioning of the mechanism of state regulation of the financial sector in the system of economic security, the conclusion was made that the conditions for the emergence of the crisis phenomena were largely formed because of the use in the financial sector of many countries "The supervision system based on risk".
With the growing interpenetration of the economies of different countries, intensification of the international financial institutions activities, and transnational economic structures, the financial systems of the countries become extremely vulnerable that directly threatens not only economic but also national security in general.
The policy in the financial sector of the economy through the mobilization of finance and its distribution is aimed to achieve a certain goal. Its role in the social issues is quite obvious. Therefore, the role of fiscal policy in stabilizing the economy presents the greatest theoretical interest. The objective of stabilization is reduced to achieving a steady, high quality growth. Within this overall objective the following points are observed: full employment; price stability; balance of payments equilibrium.
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