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Managing the Bank’s Currency Risk in the Face of Turbulence in Global Financial Markets
Lavreniuk V. V., Lukianchuk D. Y.

Lavreniuk, Vladyslav V., and Lukianchuk, Denys Yu. (2020) “Managing the Bank’s Currency Risk in the Face of Turbulence in Global Financial Markets.” Business Inform 11:288–295.
https://doi.org/10.32983/2222-4459-2020-11-288-295

Section: Finance, Money Circulation and Credit

UDC 336.71:005.334]:339.722

Abstract:
The article is aimed at researching the theoretical-methodological and practical aspects of the bank’s currency risk management. To solve the tasks set, the authors use general scientific and specific methods, in particular: logic-dialectical, mathematical and graphic. Based on generalization, analysis and comparison of different approaches, the methods and instruments for managing the bank’s currency risk are systematized. The bank’s currency risks are typed and the main determinants of their occurrence are identified. The types of currency risk hedging instruments are systematized and their contents are disclosed. The essence of the bank’s currency position, the methodology of its account are disclosed and the necessity of compliance with the methodology are substantiated. The main operations that influence the bank’s currency position are identified. An analytical assessment of the currency position of banks is performed (JSC CB «PrivatBank», JSC «Oschadbank», JSC «Raiffeisen Bank Aval», JSC «A-Bank»); the model of maximization of the bank’s profits is computed and appropriate conclusions about their activities are drawn. With the use of economic-mathematical instrumentarium the dynamics of the hryvnia currency exchange rate are forecasted and the indicators of VaR for banks (JSC CB «PrivatBank», JSC«Oschadbank», JSC «Raiffeisen Bank Aval», JSC «A-Bank») are calculated according to different time horizons. It is determined that the model of minimization of currency risk through currency position management serves as an effective instrument for analyzing and substantiating internal limits of currency risk and permissible ranges of changes in financial results of the bank’s activity. Prospects for further research are: 1) development of an instrumentarium for currency risk assessment based on ARCH and GARCH models of various modifications; 2) development of macro stress tests with a focus on currency risk and taking into account the systemic characteristic, which is the transmission of currency risk to other sectors of both the financial market and the economy.

Keywords: currency risk, bank, turbulence of financial markets, model of minimization of currency risk.

Fig.: 2. Tabl.: 5. Formulae: 3. Bibl.: 19.

Lavreniuk Vladyslav V. – Candidate of Sciences (Economics), Associate Professor, Associate Professor, Department of Banking and Insurance, Kyiv National Economic University named after Vadym Hetman (54/1 Beresteiskyi Ave., Kyiv, 03057, Ukraine)
Email: [email protected]
Lukianchuk Denys Yu. – Postgraduate Student, Department of Banking, Kyiv National Economic University named after Vadym Hetman (54/1 Beresteiskyi Ave., Kyiv, 03057, Ukraine)
Email: [email protected]

List of references in article

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“Richnyi zvit A-Banku“ [Annual Report of A-Bank]. https://drive.google.com/file/d/1pY2yXHv7t1E5gjZd2rHPrDYdlSeYnSCL/view
“Richnyi zvit Oshchadbanku“ [Annual Report of Oshchadbank]. https://www.oschadbank.ua/sites/default/files/2020-07/SSBU_19_Separate%20FS_UKR.pdf
“Richnyi zvit Raiffaizen Bank Aval“ [Annual Report of Raiffeisen Bank Aval]. https://www.aval.ua/storage/files/19-rba-separate-ukr-financial-statements.pdf
“Richnyi zvit PryvatBanku“ [Annual Report of PrivatBank]. https://static.privatbank.ua/files/R%D1%96chnij+zv%D1%96t+za+2019rg..pdf
[Legal Act of Ukraine] (2005). https://zakon.rada.gov.ua/laws/show/z0946-05#Text
“Limity vidkrytoi valiutnoi pozytsii“ [Open Currency Position Limits]. Ofitsiinyi sait Natsionalnoho banku Ukrainy. https://bank.gov.ua/control/uk/publish/article?art_id=123431
“Makroekonomichnyi prohnoz na 2020-2022 roky“ [Macroeconomic Forecast for 2020-2022]. Ofitsiinyi sait Ministerstva rozvytku ekonomiky, torhivli ta silskoho hospodarstva Ukrainy. https://mof.gov.ua/uk/macroeconomic_forecast_for_2020-2022-379
“Ofitsiinyi kurs hryvni shchodo inozemnykh valiut“ [The Official Exchange Rate of Hryvnia Against Foreign Currencies]. Ofitsiinyi sait Natsionalnoho banku Ukrainy. https://bank.gov.ua/markets/exchangerates?date=27.12.2019&period=daily
Prymostka, L. O. et al. Upravlinnia bankivskymy ryzykamy [Banking Risk Management]. Kyiv: KNEU, 2007.

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