DOI 10.47576/2712-7559_2022_5_1_15 UDC 336.71
Bavrova Olga Sergeevna,
Postgraduate Student, Department of Digital Financial Technologies, Sberbank of Russia, Institute of Economics, Public Administration and Finance, Siberian Federal University, Krasnoyarsk, Russia, e-mail: hudyakovaos@gmail.com
Yankina Irina Alexandrovna,
Doctor of Economics, Professor of the Department of Digital Financial Technologies, Sberbank of Russia, Institute of Economics, Public Administration and Finance, Siberian Federal University, Krasnoyarsk, Russia, e-mail: yankina_ia@mail.ru
REGULATORY APPROACHES TOTHENATIONALECO-SYSTEMS: THE IMPACT OF FOREIGN BANKS ON THE BANKING SYSTEM IN RUSSIA
The paper discusses the prerequisites for a new supervisory approach to national financial ecosystems, and also describes the main trends in the regulation of the banking industry in Russia and the world. The authors focus on factors that may hinder or facilitate the development of a platform national economy, in particular those that should be considered when including foreign participants and systemically important financial institutions or SIFIs in national ecosystems.
Keywords: banking supervision; banking regulation; banking ecosystem management; a systemically important financial institution; national ecosystem; banking system; systemic risk; foreign banking.
УДК 336.71
Баврова Ольга Сергеевна,
аспирант кафедры цифровых финансовых технологий Сбербанка России, Институт экономики, государственного управления и финансов, Сибирский федеральный университет, г. Красноярск, Россия, е-mail: hudyakovaos@gmail.com
Янкина Ирина Александровна,
доктор экономических наук, профессор кафедры цифровых финансовых технологий Сбербанка России, Институт экономики, государственного управления и финансов, Сибирский федеральный университет, г. Красноярск, Россия, е-mail: yankina_ia@mail.ru
ПРОБЛЕМЫ РЕГУЛИРОВАНИЯ НАЦИОНАЛЬНЫХ ЭКОСИСТЕМ: ВЛИЯНИЕЗАРУБЕЖНЫХБАНКОВ НА БАНКОВСКУЮ СИСТЕМУ В РОССИИ
В работе рассматриваются предпосылки нового надзорного подхода к национальным финансовым экосистемам, а также описываются основные тенденции регулирования банковской отрасли в России и мире. В центре внимания авторов находятся факторы, которые могут препятствовать или способствовать развитию платформенной национальной экономики, в частности те, которые следует учитывать при включении иностранных участников и системно значимых финансовых институтов или SIFI в национальные экосистемы.
Ключевые слова: банковский надзор; банковское регулирование; управление банковской экосистемой; системно значимая финансовая организация; национальная экосистема; банковская система; системный риск; зарубежный банкинг.
1. Introduction
As a consequence of digital, geopolitical and social challenges facing the modern banking sector and their increasing perplexity, governments and regulatory bodies are getting more and more ineffective in their attempts to deal with the emerging issues or to reduce their consequences. One of the reasons for this regulatory crisis is the tendency of financial institution, both in Russia and abroad, to enlarge their structure and increase capital due to the procedures of mergers and acquisitions, as well as through attaining wider market coverage and consolidating into banking groups and huge financial holdings [4, p. 77]. On the other hand, a global trend for digitalisation has resulted in an increased number and wider coverage of financial and non-financial services by all-encompassing, cost-cutting and labour-efficient banking eco-systems [3, p. 175]. In Russian Federation, such financial eco-systems were initially introduced and spread by incumbent banks and systemically important financial institutions (further abbreviated as SIFIs) [2]. The key operators of business sectors are involved into dynamic business models and financial ecosystems, aiming at both financial and non-financial services, to provide its owners the value added benefits in gaining business competitiveness [3, p. 177].
Thus, it has become obvious that the necessity to elaborate and adopt a new more effective approach to the supervision of banking ecosystems, especially the ones that involve SIFIs and other vital parties, has become an urgent necessity rather than a luxury. Governments and regulating bodies are constantly seeking methods and elaborating more profound algorithms to both foster the development of nationalised financial or banking ecosystems in order not to hinder the industry growth, and to hedge and mitigate the risks that are brought by growing span of financial and non-financial participants of the enlarging and all-encompassing banking ecosystems.
This paper attempts to show the main trends in financial ecosystem regulation and digital data governance and the background for the development of the national banking ecosystem in Russia and abroad. The aim of the research is also to outline the principles of national ecosystems supervision as well as to argue that such a national unified ecosystem may be seen
as both a challenge and an opportunity for the state and economy as a whole. Moreover, we will focus on the benefits and drawbacks of the regulatory approach suggested by the Bank of Russia [1] on the grounds of designing and creation of the unified national ecosystem of financial and banking services monitored by the Central Bank.
2. Materials and methods
2.1. The conceptual background of the national financial ecosystem
In such countries as the USA and China, which are considered the pioneers of FinTech and largest ecosystem development platforms, the problem of rules and regulations, applied to financial ecosystems with a variety of FinTech providers involved, is still considered unresolved. The reason for that is the barely regulated but rapid development of banking ecosystems with regard to interconnection, increased systemic risks and complexity within the ecosystems. Such circumstances might easily create a significant legal bargaining with other business models, pose challenges to the competitive business and financial environment, make the producer dependent on the rules and tariffs of ecosystems, or even irretrievably bind consumers to eco-systems and often latently determine their consumption models.
Furthermore, some researchers have also highlighted the higher systemic risk and the risk of banking system contamination due to the growing interconnection among financial institutions which may trigger the propagation of shocks in the banking industry and the whole financial network [7]. In this regard, the absence of a strong and unified national ecosystem would be seen as one of the major obstacles on the way of technological development. In such countries, the "issue of protecting national producers" and the ways to efficiently connect them to the local banking and financial services is particularly acute [1]. That is why even in the countries of origin of global ecosystems, like the USA and PRC, the issue of regulating the activities of both their own and foreign ecosystems is on the priority agenda of both governmental regulators and antimonopoly bodies.
The methodological approach applied in the study is a mixed methodology based on a time-series data analysis, comparative design and case study analysis used to assess the extent to which various factors affect the regulation of
national eco-systems. Case study analysis of one of the foreign banks, which make up the national ecosystem and is listed in the Russian SIFIs, such as Raiffeisen Bank International, was conducted in order to provide an opportunity to advance our knowledge of factors, which may threaten the development of national financial eco-systems.
2.2. The proposed model of national financial ecosystem
Within the scope of the following research paper, a national ecosystem is viewed as a centralised economic structural entity, encompassing the principles of both natural and digital ecosystems, which is created and propagated through complex and flexible omni-channelled platforms under the maintenance of key players of banking and financial sectors
of economy and under the supervision of the national Central Bank.
Based on the abovementioned approach, a new model of financial or banking ecosystem would combine various areas of activity through interrelated financial and digital data resources and supporting instruments. The resources may include the following (Figure 1):
- customer database and the related big data services;
- personalized consumer experience;
- digital platforms (involving mobile platforms);
- interfaces for all the participants;
- digital algorithms of digital data transaction and verification;
- user authorization methodology;
- software and hardware infrastructure;
- affiliated assets.
Fig. 1. The building blocks of Russian national eco-system. Source: developed by the author on the basis of [1]
In accordance with the new approach to the national financial ecosystem framework, the assets and resources consequentially allow banks to improve existing services, as well as to create the new ones, which may be more convenient and efficient, providing a wider range of affordable personalized products for all types of consumers.
2.3. Advantages and disadvantages of national eco-systems
The transformation from traditional economy to a platform-based economy with incorporation of various ecosystems is currently witnessed in most world markets and is an inevitable sequence of, firstly, the accumulated technological advances, secondly, the demand for changes, thirdly, the removal of geographical barriers from the demand side, and finally, the exhausted capabilities of conventional business models [9].
As a rule, an ecosystem includes a variety of platforms, which may give clients omni-channelled access to necessary products and services (such as financial products, mobile services, real estate, renting, healthcare, education, travelling, commuting services etc.), both online and offline. Unique ecosystem may be built around one singular basic need or several necessities, like additional documentation assistance, mortgage
services, design and cleaning support, which may be centred on the demand for real estate for individual physical clients, as well as legal entities. The key element of an ecosystem would be the creation and maintenance of the unified "client's profile", which encompasses the extensive database on the type of purchases within the eco system itself, the prototype of which is presented in figure 2
Fig. 2. The prototypes of the major services of eco-systems. Source: developed by the author on the basis of [1]
Considering all the factors of an eco-system, it can be concluded that the main objective of any initially launched and efficiently operating ecosystem is the conceptual framework of a co-related and co-dependent system, which will enable the wider range of transactions within and beyond the system. According to the report by the Bank of Russia [1], the main drawbacks of any eco-system, including the national ecosystem, may include the following aspects:
- unprofitability of the ecosystem at an early stage of development (though it is recognized and the risks are all counted taking into account the benefit of rapid attraction and inclusion of new clients and suppliers);
- high costs of designing, launching and maintaining them, however the economy of scale will help to repay these costs later after the platforms within the ecosystem are effectively operating;
- incorrectly perceived concept of ecosystem services among common users, which is based mostly upon the misunderstanding that platform-provided services are uncharged.
Of course it is not true, as in this case, the form of monetization for the platform is either advertisement (i.e., the customer pays by giving their attention) or the platform commission which is already included in the price of the purchased product or service;
- rather a challenging issue of finding a balance between the interests of consumers and suppliers, managing internal conflicts of interests during the operation of the platform;
- an absence of understanding of the main principles that will regulate the ecosystem and guide the its key participants;
- considerably higher systemic risks due to the inclusion of an impressive amount of interrelated and co-sufficient players (financial and non-financial) on the eco-system's platforms. The new approaches to mitigate the systemic risk in the banking sector should be elaborated to prevent the contamination of all the participants of the eco-system.
Among the advantages of platform-based ecosystem suggested by the Bank of Russia, it would be reasonable to highlight the following:
- an overwhelming enhancement of the quality of life of consumers due to the fact that services are more accessible, goods owing to higher competition among suppliers are less expensive and the choice of products is wider;
- increased reliability of services provided by the ecosystem platform due to the shift from the initial "bulletin board" format to a centralized platform-based complicated model with established and clear platform rules for suppliers at all levels;
- the creation of new final user habits along with the formation of the digital platform market, which have already become the characteristic feature of the platform-based business model;
- overwhelming opportunities to combine a number of platforms into a unique eco-system, including offline services that complement online ones and provide an end user with a new quality of customer experience: no need to register separately on each platform as ecosystem uses a single end-to-end client identifier which is mainly located in a single mobile application generally known as a Super App.
- time-saving techniques can enable a client to find all the necessary individually-prepared products and services on a single platform, on the grounds of the personalized offer on the platform based on the "client's profile";
- maximum benefits for the small and medium enterprises based on the concept of wider markets that suppliers might have never entered due to geographical barriers;
- additional support of ecosystem platforms enables small and local enterprises to be involved into the system, which not only removes territorial restrictions, but also provides businesses with enhanced logistics and warehouse services;
- a surplus role of ecosystem as a business incubator, which would help start-ups and entrepreneurs with business registering and would provide consulting. Moreover, various ecosystem platforms may also endeavour and combine the functions of marketing, advertising, promotion, call centres and client support, thus enhancing the development of the whole system.
Therefore, the platform-based ecosystem presents manufacturers a superior and unique technologically advanced framework, which "requires significant investments, as well as multiple inter-related services". Based on economies of scale and consumer behaviour, individual manufacturers may soon find ecosystem
platforms more profitable in comparison with an independently built value chain to the client.
2.3. The innovative regulatory approaches to national ecosystem in Russia
The possibility and form of entry of financial organisations (banks and SIFIs) into the ecosystem market depend on the severity of banking governance and financial regulation in a particular jurisdiction. In our country, extensively growing financial institutions have a tendency to mutate into Tech companies and then create their own eco-systems, which provide financial and non-financial services, as well as carry out joint projects with Internet companies. Based on the analysis of the business models of the biggest Russian and foreign eco-systems, in can be concluded that they all operate according to a hybrid model, combining open and closed platform segments. So, for example, financial serviced are mostly provided at the closed and state-regulated platforms (either by the ecosystem itself, of by the partnering financial institutions), while commodity marketplaces within these ecosystem s operate according to an open model, while the ecosystem itself acts as a supplier of mobile communications or messengers [1]. The main risks brought by the development of the platform-based economy are divided into:
- risks for individuals - customers of ecosystems;
- risks for individuals who are not clients of eco-systems;
- risks for suppliers - participants in ecosystem s that produce a service or product;
- risk for the whole system and systemic cornerstones;
- risks for providers of services or goods not included in ecosystem s;
- risks for the economy as a whole;
- risks of technological solutions monopolization.
The main risk for ecosystem clients and platforms consumers is a sharp decrease in the possibility of choice, caused not so much by complexity as by the lack of desire to "switch" and look for the necessary goods and services outside the ecosystem perimeter.
As illustrated in figure 1, national ecosystem in Russia would include a variety of systemically important financial institutions (or SIFIs). According to the decree of the Bank of Russia No. 3737-U dated July 22, 2015 "On the Methodology
for Determining Systemically Important Credit Institutions", SIFIs are defined as the largest credit institutions, the stability and efficiency of which affect the banking system and state economy as a whole [6]. All the financial activities of SIFIs in our country are under control of the Bank of Russia within the acts of the decree No. 5778-U "On Determining the List of Systemically Important Credit Institutions". The key principles for listing banks as systemically important are the size of the credit institution and the amount of funds raised, including private deposits. For the present day, SIFIs in Russia amount to 13 banks, four of which are banks with full international shareholders ownership:
- Rosbank owned by the Financial Group Société Générale, France;
- Raiffeisen Bank International, Member of RBI Group, Austria;
- Tinkoff neo-bank, owned by TCS Group Holding PLC, Cyprus;
- UniCredit Bank, owned by UniCredit PLC. Group, Austria.
The major scenario for national eco-system, suggested by the Central Bank of Russia, evolves from the concept of a total and overwhelming participation of the Bank of Russia on all stages for regulating the financial and banking activities, and SIFIs are at the cornerstones of the system. Initially, the Bank of Russia attempted to create a list of the largest banks or SIFIs in 2014. Then, that first list included 50 credit institutions at once. Their contribution to the banking system was assessed as significant, and various criteria were taken in account to justify unconditional reliability. Though, many of those banks were deprived of licenses in 2014, 2015 and 2016, as a result, the Central Bank had to reconsider its approach to determining SIFIs, thus, the list was reviewed annually since 2015. At the time being the SIFIs include 13 largest banks, both local and foreign, state-owned, private and with partial state ownership, which collectively account for more than 77% of the total assets of the Russian banking industry.
The optimal system of the Russian market would be launched and controlled by the megaregulator or the Bank of Russia, which can eventually imply the harder stipulations and regulations for banks on all the levels from SIFIs to smaller commercial banks. If the regulator allows foreign banks to participate in the Russian national ecosystem - such as Rosbank,
Raiffeisen, UniCredit or Tinkoff bank - then all possible plans for the regulator's participation in controlling the ecosystem and the requirements or limits for access to it for foreigners must be considered in advance. There would be additional risks to the banking system itself; moreover, the whole idea of participation of foreign banks in local ecosystem should be reconsidered in case the threats and risks are too high for the economy and banking sector to bear.
2.4. Case study of key ecosystem indicators of Raiffeisen Bank International
The internationalisation of banking activities has been acknowledged as one of the most distinguishing trends in this industry for the last decade [4]. The main causes of risks incurred by the participation of foreign banks in the Russian national ecosystem are centred on a certain number of micro-economic and financial indicators, which may demonstrate the precarious trends within the business model of a foreign bank. The risk incurred by the foreign financial institution, due to the systemic risk substantial growth, may also effect the ecosystem built on the participation of foreign banks. Close attention to the particular variables and measures may help to predict the insecure behaviour of financial institutions and thus mitigate the risks of participation of foreign banks in national ecosystems. The chosen indices are found in open sources and include the following:
1) CAR or capital adequacy index (N1.0 and Basel III) (a measurement of a bank's available capital which is a percentage of a bank's risk-weighted credit exposures. It should protect depositors and maintain the stabile and efficient way of a financial system. It includes the 2 types of capital: Tier-1 capital, which absorbs losses without a bank being required to cease trading, and Tier-2 capital, which covers losses in case of liquidation. The formula is the sum of Tier 1 capital and Tier 2 capital (which is an equivalent of the Total capital) divided by Risk weighted assets;
2) total assets (which is an indicator of a bank size) and total equity;
3) operating income, Net Income (operating income less any other non-operating expenses, such as interest and taxes) and income taxes;
4) liabilities;
5) LDR or loans to deposits ratio (used to assess a bank's liquidity by comparing total loans to total deposits during the similar period
and is formulated as total loans divided by total deposits; the ideal loan-to-deposit ratio is 80% to 90%);
6) LAR or loans to assets ratio (measures the total loans outstanding as a percentage of total assets; the higher ratio indicates a bank is loaned up and its liquidity is low, so this bank would be more risky to higher defaults; previous studies have found that the LAR is negatively associated with cost efficiency but positively with revenue efficiency [9]);
7) NPE ratio (non-performing exposure ratio, including bonds, which identifies the amount of non-performing loans to total loans; all banks are sorted by their nonperforming loans exposure (NPE) ratio, which is European Central Bank's Asset Quality Review (or AQR) - adjusted NPE level as percentage of total credit exposure);
8) ROE or return on equity before and after tax (measures the profitability on accounts of stockholders' equity, calculated as Net Income divided by Average shareholder's equity and identifies the amount of risk, such as a very high ROE indicates higher risk, as a bank possesses a small equity amount in comparison to its net income, or that it has inconsistent profits, debt excess or a negative net income);
9) ROA or return on assets ratio (applied to banks because the cash flow analysis is more difficult to construct thus it is an important profitability ratio, indicating the per-dollar profit a bank earns on its assets; since banks are
highly leveraged, ROA of 1 to 2% may indicate significant revenues and profit for a bank; is calculated as net income divided by total assets);
10) Profit or loss before and after taxes, as well as consolidated profit;
11) Cost to income ratio;
12) RWA or risk-weighted assets (specifies the minimum amount of capital kept by a bank to lower the risk of insolvency);
13) Total capital ratio, also known as capital adequacy ratio;
14) The number of employees and business outlets as indicators of stabile growth and efficiency of a chosen financial institution.
2.5. Raiffeisen Bank International indicators analysis
Founded in 1827 in Vienna, Austria, Raiffeisen Bank International is one of the largest Austrian banking group and an efficient commercial bank. The first brunch in Eastern Europe was opened in 1938, while after 2000 the group has expanded its presence in over 14 countries of Central and Eastern Europe and later, in 2003, all the branches have been united under one brand name and company Raiffeisen International. In Russia, the group has opened its first subsidiary in 1996 and currently they have 5 brunches and over 115 subsidiary offices [8]. The website of the Central Bank of the Russian Federation affirms "the ultimate owners of Raiffeisen Bank International (shortly RBI) are about 1,700,000 shareholders - unrelated individuals, each of
Fig. 3. Financial indicators of Raiffeisen Bank International (RBI), assumed from the annual report data (2001-2021)
which does not directly or indirectly own more than 20% of the authorized capital." Raiffeisen Bank International is an absolute owner of the Russian Raiffeisen Bank. At present, the bank has the 10th position in Russia in terms of assets, which, on the basis of the fourth quarter of 2021, were estimated at almost 1.6 trillion roubles. The bank's net profit over the past year increased by 7.6% - to a record of 41 billion roubles, following the IFRS financial statements. The analysis of annual reports of the Raiffeisen International Bank has revealed the main trends among the chosen variables. It is supposed that due to the close attention to the specific ratios and indexes, peculiar tendencies might be noticed that later can indicate the higher risk of incorporation of financial institution with foreign participation in the creation of Russian national banking ecosystem. International activities of SIFIs which have foreign participation in their equity should
be carefully monitored from the aspect of all the above mentioned factors and indexes.
The bank's efficiency looks promising as the number of retail outlets has been growing steadily since 2001, while the amount of employees peaked in 2008, then started to go down supposedly as the aftermaths of the 20072009 debt crisis and financial breakdown of 2014. Based on the annual report 2021, there are 46185 staff members working in 1771 business outlets worldwide compared to 13478 workers and 604 offices 20 years ago. The analysis of the income statement major indicators has revealed positive trends as all the chosen variables were growing steadily over the past two decades. Operating income and net income both have increased sufficiently from €423 mln. in 2001 to €5570 mln. in 2021. There have been serious drops in net interest income due to financial crisis in 20072009, 2014 and 2020.
Source: compiled by the author on the basis of [5]
Fig. 4. Income statement indicators of Raiffeisen Bank International (2001-2021), € mln
Basic indicators of operational efficiency of RBI are profit and loss metrics. The figure 5 below demonstrates that total assets have significantly increased since 2001, and are at present at all times high amounting to over €192100 mln., which displays the growing expansion of the company and justifies the reasons for being listed into Russian SIFIs. P&L before and after tax have also been increasing steadily with only insufficient short-term fall during crisis periods in 2009, 2014-2015 and 2020 (COVID-19 lockdown
and subsequent economic downturn). Total equity has risen in 17 times over 20 years, while total assets have increased 16 times from €11474 mln. to €192100,5 mln.
Key ratios that are under the supervision of Basel III accords include ROA, ROE before and after tax, Consolidated ROE, Cost to income ration, Loans to deposit and Loans to assets ratios. The changes in these ratios are illustrated in figure 6 below. It can be noted that LDR as the main indicator of balancing loans and deposits
Source: compiled by the author on the basis of [5]
Fig. 5. Profit and loss indicators of Raiffeisen Bank International (2001-2021), € mln
has been subject to the most changes. This ratio is ideal when it amounts to 80% to 90%, but if it rises more than 100%, it means that the bank has lent more than it has in deposits, which may be a sign of both internal management problems and external economic conditions, which can influence both depositors and loaners. The rise in LDR started in 2004, and was increased due to
economic crisis of 2008, after which the demand for loans decreased, to rise sharply again in 2010. After the turbulence in financial conditions within that period, the ratio started to decrease steadily to reach the comfortable 88% and 89% in 2020 and 2021 respectfully.
At the same time, LAR has not been changing so much in comparison with LDR, and was
Fig. 6. Financial efficiency indicators of Raiffeisen Bank International (2001-2021), % - ИНДУСТРИАЛЬНАЯ ЭКОНОМИКА • № 5, том 1, 2022
fluctuating between the rates of 50% to 70%, which means that bank's liquidity was at most of the times high in amount and could cover the existing loans. As a rule, most investors loan for a LAR of 30 to 60%, though at crisis time periods this cap would rise. It is notable that the ratio was rather stable during these two decades, which is a good sign of wise and careful management of assets and liabilities. As for ROE (before and after tax), Consolidated ROE, ROA and Cost to Income ratios, they were all very stable since 2001 and didn't change much within the span of
0,1 to 2% which indicates significant revenues and profit for the bank.
Other ratios and indexes which are also specifically under the Central Bank control are RWA or Risk-weighted Assets (total and credit risks), Capital Adequacy Requirement, NPE ratio (or non-performing exposure ratio) and NPE Coverage ratio, both available only since 2006, CAR (should be >10.5) and Total Capital Ratio (see figure 6 and figure 7) in the time span between 2001 and 2021.
Fig. 6. Basel III requirements ratios of Raiffeisen Bank international (2001-2021), %
CAR shows the amount of capital available in a bank, and indicates if it has enough capital in reserves to deal with a specific amount of losses before bankruptcy. The higher the CAR, the more likely a bank is to meet its financial obligations and survive an unforeseen crisis. According to Basel III requirements, the minimum CAR should be 10.5. The graph shows that RBI was able to maintain the high level of CAR during its 20-year operation, with the rate being the highest after 2004 downturn. As for NPE ratio and NPE coverage ratio, they have been regularly but little altered since 2006. NPE ratio indicates the amount of loans in default or close to default, generally exposures are non-performing after being in default for 90 days, so the lower the rate, and the less non-performing loans a bank has. NPE Coverage ratio signifies a bank's ability to absorb future losses. The higher this ratio, the more prepared a bank is for covering future
losses from unpaid loans. Based on the graph, the NPE Ratio was all the time lower than 0,1, with the highest level of 0,1139 in 2014 crisis period, which is a positive indicator of RBI ability to manage non-performing loans and justifies the bank as being safe and reliable. While NPE Coverage ratio has decreased over the last 15 years, lowering from 1,183 in 2006 to 0,6251 in 2021. This may imply that the provision of the bank on the non-performing loans net loss has reduced due to more effective ways of managing these losses.
The most significant growth is at the Risk-weighted total asset and RWA credit risk asset, with an impressive increase from €9025,47 mln. to €89920,87 mln., which indicates the minimum amount of capital a bank should hold, correspondent to the risk profile of the bank's lending activities as well as other assets. The continuous growth of RWA shows that the
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bank is expanding its lending business, thus the past 20 years, while funds requirements have
guaranteeing the credit risks with more capital grown by 7 times. The more detailed aspects of
in order to protect depositors. Total capital has financial growth within 20 years is presented in
increased from €1071 mln. to €15806,8 mln. over figure 7.
RBI Basel III capital requirements and RWA, 2001-2021 (C mln.)
12QODO -
-RWA credit risk (Cmln)
-Total RWA (Cmln)
-Total capital/funds requirement (or capital adequacy) (Crriln)
—--Total capital (CmIn)
Source: compiled by the author on the basis of [5]
Fig. 7. Basel III capital requirement and RWA of Raiffeisen Bank International (2001-2021), € mln
3. Results and conclusion
The following study, based on the analysis of the suggested approach to creation and regulation pf the first Russian national financial ecosystem (which centres on the Bank of Russia supervision and encompasses SIFIs and smaller commercial banks), as well as on the case study analysis of one of the SIFIs with complete foreign ownership (Raiffeisen Bank International), has revealed that there is an urgent need for careful and consistent regulation approach to new national ecosystems. Global SIFIs are at the moment under scrupulous control of the Basel Committee on Bank Supervision, but the global approach fail to indicate the national specific banking industries' weaknesses and opportunities. As have been depicted in the paper, the specific Russia-based national ecosystem will be most probably centred on the SIFIs and the incorporating large industries, which may generate a large amount of active and supportive clientele.
Moreover, a close attention to the foreign participants of the system is needed in order to prevent the rapid contamination in case of economic downturn or default of any of the SIFIs. On the case of RBI it has been illustrated that it is not only important to control the development of the ecosystem within the country, but also to assess the global interference of SIFIs with foreign participation with meticulous detail to Basel III requirements and the bank's efficiency,
reputation and financial stability indicators. In particular, the conclusion should be made upon the following issues:
1. Russian economy is rapidly and inevitably moving towards platform models and all-encompassing massive eco-systems, like the rest of the developing and developed world.
2. Platform-based ecosystem may bring a huge variety of innovative features to the economy and provide a higher quality of life to consumers (both physical and legal entities). As a result, daily purchases can already be made online, quickly and in a few clicks as ecosystem are often created as a one-stop-shop solution, allowing clients to fulfil all operations in a single mobile application. Accumulation of a large amount of publicly available data allows the ecosystem to form a "customer portrait" and ensure the flawless receiving services, as well as improve the accuracy of targeted offers of various products, their customization to the needs of a particular person.
3. Platforms and ecosystem provide new opportunities for goods and services suppliers on various levels. Thus, online trading platforms give small and medium enterprises a way to reach a large number of buyers via the Internet, removing geographic limitations for the development of their business models.
4. The world's largest ecosystem have emerged from large technology companies with
significant data sets and a wide customer base. A key feature of Russia is the financial sector having the leading role in the creation of ecosystems. Russian IT companies are also entering the ecosystem and extending their service variety by offering financial services to clients.
5. To mitigate the risks for both ecosystem participants and other economic entities affected by their activities, national eco-system's development needs to be thoroughly regulated. Systemic risks may include the risks of unfair competition and monopolization of certain market segments, big data and technologies, discrimination of smaller financial market players, misuse of personal customers profiles information, insufficient level of information security, protection against financial fraud and other.
6. In the platform-based economy of national financial eco-systems, amount of data, its sufficiency and availability on various platforms become the major values. Thus, the rules and regulations for their transaction, application, storage and other should be exercised by all consumers and suppliers, and every part should be aware of the right to dispose this information. As a result, data operations transparency and data management are considered the crucial issues in the regulatory policy.
7. The risks incurred by creditors and depositors of banks within ecosystem should be clearly understood and highlighted. They include the risks associated with the entry of banks into non-financial industries that are new to them, including strategic risk, the risk of forced support, and the risk of information security.
8. The regulatory policy in relation to national and global ecosystem is now undergoing its active formation stage due to the fact that the conventional regulatory tools and techniques are quickly becoming outdated and ineffective while the new ones are only being created. At the same time, as international practice shows, the late application of regulatory instruments will result in accumulation of risks and extreme and forceful radical steps, which are frequently negatively perceived by business and society as a whole. For that reason, it is particularly vital to establish alacritous rules, restrictions and requirements for the most favourable regulatory scenario.
9. In order to minimize the drawbacks of the uncontrolled development of ecosystem in Russia, it is necessary to take rapid and adequate
regulatory and supervisory measures, and in this regard, the modernization of the regulatory area is needed in the near future. Understanding the risks arising from the participation of foreign banks and SIFIs in the national financial ecosystem will guarantee the necessary flexibility of the regulatory toolkit and its timely adaptation to changing conditions.
10. Digital markets are highly dynamic - the dominance of individual ecosystem s can grow faster than in traditional markets. It is also possible to radically reduce the number of vendors with traditional business models that are outside of platforms and ecosystem s (including a reduction in the number of traditional financial institutions). The new regulation should minimize the negative consequences, including the consequences of the process of such transformation.
11. National regulation should also ensure that the competitive environment in the domestic market is protected in the face of a potentially rapid increase in the dominance of global ecosystem s. The cross-border nature of the activities of foreign ecosystem players, combined with regulatory and tax arbitrage, could lead to their dominance in the Russian market in a short time.
12. The role of the governance body and the mega-regulator (central bank) as vital participants in the platform-based ecosystem should be clear, consistent, transparent and foreseeable, while it is important to ensure that the state is equidistant from market participants and that there is no exclusivity in access to state information systems.
13. The optimal structure of the Russian market may be conceived as several large ecosystem s combined into one all-encompassing national ecosystem with condition of regular competition between its internal and external (or foreign) participants, niche suppliers and smaller platforms that satisfy the demand of customers outside the ecosystem and challenge the leading eco-systems.
14. The key objective of the state megaregulator or the Central bank is to minimize the systemic risks and maintain a competitive environment. This may involve prevention of artificial obstacles for smaller or niche players, promotion of innovative features and ensuring the maximization of benefits received by the population and business of the country from the introduction of platform-based financial ecosystem.
In conclusion, the following research reveals the need for further investigation in the field of the major trends in the regulatory mechanisms for ecosystem worldwide. There is no doubt that ecosystem have become a truly global phenomenon, the questions which still remain unsolved include the most effective regulation approach and the ways to mitigate the systemic risks connected with participation of various industry players in the development of national eco-systems.
References
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