УДК 336.71.078.3
O. A. Sergienko, Phd, (Economics), L. S. Guryanova,
Phd, (Economics), O. S. Sagaydachnay, magister (Economics),
Kharkiv National Economic University
MODELS OF ANALYZING
OF THE COMPETITIVE ENVIRONMENT IN ESTIMATION
OF THE BANK’S ECONOMIC SECURITY
This article is devoted development of complex economic-mathematical models of
multidimensional analysis of the competitive environment of the bank’s economic security.
Implementation of models of estimating and analyzing the competitive environment is built
on the basis of researching Ukrainian credit unions and is developed for each region of
Ukraine. It makes possible to raise the level of management decisions concerning formation
of strategic alternatives for maintaining the commercial banks viability.
Keywords: analyzing, commercial bank, competitive environment, credit unions, economic
security, estimation, methods of multidimensional analysis, taxonomic integral indicator, threat.
Introduction. The peculiarities of the current economic situation in
Ukraine are facilitating an increased risk for any and all credit institutions.
The experience has shown that almost always there is a threat of losing the
bank funds invested in certain projects. So nowadays all banks are susceptible
to threats to the banking activities which also increase due to the unstable
banking system state that could reduce the level of commercial bank’s
economic security [3; 6].1
One of the major threats to the economic security of commercial banks
is the external threat of competitive environment [1]. The most prominent
representative of the bank competitive environment in Ukraine is the credit
union. A great number of credit unions in Ukraine make us analyze the threats
that they can cause to banking economic security.
Main body. Investigation of the competitive environment of banking
activities was carried out with the algorithm presented in Fig. 1.
1. Analysis of the peculiarities of competitive institutions
2. Comparison of the basic principles of credit institutions
3. Comparison of the dynamics of credit institutions
4. Evaluation of the activities of credit institutions of the regions of Ukraine
5. Evaluation of threats to the competitive environment in each region of Ukraine
Fig. 1. Models of analyzing the competitive environment
of the banking economic security
© O. A. Sergienko, L. S. Guryanova, O. S. Sagaydachnay, 2012
Збірник наукових праць. 2012. Випуск 35
The unfair competition is an indispensable feature of modern market
economy. Its tools can be used not only to obtain undue advantage over rivals in business, but also to suppress competition in order to oust them from
the market. The most common known bank competitor is the credit union
that provides access to cheap microfinance resources. At the community
level this institution contributes to the development of small and medium
businesses, renewal and improvement of public services, increase of the
level of interaction and self-assistance of the community residents, but at
the same time, their activities affect adversely the operations of the banking
system in general and the activities of each commercial bank.
The credit union is a non-profit public organization that operates on a
cooperative basis for social protection of its members through mutual
credition with their accumulated savings [4; 10]. Non-profitability of the
credit union is due to the fact that all its activities are not for profit but to
provide credit and savings services to its members.
The credit union is a self-governing democratic organization whose
members only shall determine the types of services it provided, and set the
terms for their provision. In other words, credit unions are financial mechanism through which people by cooperating of their efforts, ideas and resources can get much cheaper services they need than if each of them tried
to act independently. In particular, credit unions are determined by the following features:
 The credit union has always been created and operates on the basis of a
monolithic community of people sharing interests, activities or places
residence;
 Credit unions provide services only to their members. Thus, unlike businesses credit union members are both their owners and customers;
 In the credit union there are no founders or authorized fund in terms of
traditional interpretations of these concepts for businesses;
 Each member of the union, regardless of the size of his contributions
shall have a vote in the management of the credit union;
 Managing the credit union shall be in accordance with the principles of
democratic self-government. The highest governing body of the Union
is the General Meeting of the members which is held at least once a
year;
 The credit union is not engaged in any business activities other than
providing credit and savings services to its members;
 The credit union is created and operates primarily to enable its members
to obtain credit on favorable conditions. The interest earned on loans by
the union, is its revenue which shall be directed to the formation of
funds and interest on the deposits of the members;
221
ДВНЗ “Українська академія банківської справи НБУ”
 The credit union by its nature is not only an effective mechanism of mutual crediting its members but also a public organization. Therefore, the
union by the decision of the general meeting or the governing body may
provide organizational and financial support for various community initiatives and humanitarian programs for its members and to charities and
social projects for children, the disabled and other socially vulnerable
population groups [5].
The dynamics of the number of credit unions in Ukraine is presented
in Fig. 2, the number had a growing trend till 2008, from the late 2009
there is a decreasing trend with peaks of growth.
Кількість кредитних спілок
850
850
800
800
750
750
01.03.04
01.03.2004
01.06.04
01.06.2004
01.09.04
01.09.2004
01.12.04
01.12.2004
01.03.05
01.03.2005
01.06.05
01.06.2005
01.09.05
01.09.2005
01.12.05
01.12.2005
01.03.06
01.03.2006
01.06.06
01.06.2006
01.09.06
01.09.2006
01.12.06
01.12.2006
01.03.07
01.03.2007
01.06.07
01.06.2007
01.09.07
01.09.2007
01.12.07
01.12.2007
01.03.08
01.03.2008
01.06.08
01.06.2008
01.09.08
01.09.2008
01.12.08
01.12.2008
01.03.09
01.03.2009
01.06.09
01.06.2009
01.09.09
01.09.2009
01.12.09
01.12.2009
01.03.10
01.03.2010
01.06.10
01.06.2010
01.09.10
01.09.2010
01.12.10
01.12.2010
01.03.11
01.03.2011
01.06.11
01.06.2011
01.09.11
01.09.2011
700
700
650
650
600
600
550
550
500
500
450
450
Кількість кредитних
спілок unions of Ukraine
Fig. 2. Dynamics of the number
of credit
Credit unions operate under the laws of Ukraine “On Financial Services and State Regulation of Financial Services”, “On Credit Unions” and
other regulations governing the activities of credit unions in Ukraine [4; 5;
10]. The activity of credit unions is based on the following basic principles:
voluntary entry and free exit from the credit union; equality of the credit
union members; self-government; publicity.
Financial activities of credit unions make them look like banks. There
is both much structures in common and different between these. Both
banks and credit unions act in the market as financial intermediaries created
to meet consumer needs for financial resources and this is common between them. The fundamental difference between these structures is the
purpose of each of them: it is a profit for the bank and financial services for
credit unions.
Common features of these credit institutions are first of all determined
by their ownership. The commercial bank is a joint-stock venture, so like
the credit union it is based on joint cooperative ownership. The credit union
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Збірник наукових праць. 2012. Випуск 35
and banking institutions have also the same management principles. Both
in the commercial bank and credit union management is based on democratic
principles which includes election of governing bodies and their accountability to the shareholders or the shareholders’ meeting [4; 6; 9]. More
detailed differences between the cooperative and the bank are listed in Tab. 1.
Table 1
Common Features and Differences between Credit Union
and Commercial Bank
Features
Form of ownership
Principle
of management
Objective of activity
Organizational
and legal form
Distribution of profits
Credit unions
Commercial banks
Common features
Common cooperative
Democracy
Differences
Meeting the needs of cooperative
members (shareholders) in loans
Consumer cooperative
Profit
Joint Stock Company
It’s distributed among
the shareholders according
to the amount of their participation
in cooperative activities,
contributions to the reserve fund
Equity contributions to members
Most are directed at increasing
the liabilities of the bank, dividends
to the shareholders, various funds
(reserve fund for shareholding
employees)
Contributions from shareholders
Sources of equity
to the authorized capital, profits
Types of services
Loans to the members
Loans, accounts of legal entities
provided
of the cooperative
and individuals, other services
Production development
Meeting the needs of credit
Object of lending
of businesses and personal needs of resources of individuals
the members of credit
and legal entities that appropriately
cooperatives
are creditworthy and provided
with financial backing
Susceptibility
Immune, as they operate only
Susceptible, because exchange
to currency fluctuations with national currency
rate fluctuations lead to significant
problems for crediting
Prospects
Ability to unite into their own
Ability to open branches in view
of development
cooperative bank or association of
of the above principles and factors
credit unions on a cooperative basis
Overseas credit unions in their development are closer to the banks,
but the difference remains: they serve only their members. So, credit unions
increasingly compete with banks that significant by influences the economic
security of each individual bank and the entire banking system in general.
223
ДВНЗ “Українська академія банківської справи НБУ”
With regard to this competition between banks and credit unions we
can say that they operate attracting savings of individuals and consumer
crediting market. In the field of micro-credit business credit unions are the
only source of crediting small and middle businesses. As for the advantages
of credit unions they possess maximum proximity to their direct recipients,
as well as enable the borrower to get credit under a simplified scheme even
in small amounts. Credit unions also have an opportunity to select their
members more thoroughly and hence their customers, so there need to scrutinize the creditworthiness of the borrower. And it is not always profitable
for banks to deal with small borrowers because of significant administrative
costs [2; 4, 5].
Ukraine now has more than 600 credit unions and approximately
170 commercial banks [6]. Comparative dynamics of the number of credit
unions and commercial banks is shown in Fig. 3. Non-bank financial services sector in Ukraine is underdeveloped, but has a huge potential that can
be developed. From the macroeconomic point of view of the necessity of
its development is caused by the ability to increase the stability of the financial system by bringing a great amount of money into circulation including savings.
Commercial Banks
850
800
210
750
700
650
600
190
01.03.2004 ions
01.06.2004
401.09.2004
4
01.12.2004
4
01.03.2005
4
01.06.2005
5
01.09.2005
501.12.2005
5
01.06.2006
5
01.09.2006
6
01.12.2006
6
01.03.2007
601.03.2008
7
01.06.2008
8
01.09.2008
8
01.12.2008
8
01.03.2009
801.06.2009
9
01.09.2009
9
01.12.2009
901.03.2010
9
01.06.2010
0
01.09.2010
0
01.12.2010
0
01.03.2011
001.06.2011
1
01.09.2011
1
1
Number of Commercial Banks
200
180
170
160
550
500
450
150
140
Date
Fig. 3. Dynamics of the number of credit unions and commercial banks
of Ukraine
To generalize the relationship between credit unions and banks in the
lending and financial services market the trend of increasing competition
between them can be predicted. Despite the rapid growth of assets of domestic banks, several factors indicate a trend towards loss of stability. One
of the factors is macroeconomic situation.
224
Banks
Nubmer of Credit Unions
Credit Unions
Збірник наукових праць. 2012. Випуск 35
Complex research of the bank’s economic security level should include estimating of all spheres of commercial bank activity in conditions of
threats of internal and external competitive environment. In order to calculate complex index of the bank economic security level it’s necessary to
carry out different types of estimation and analyzing of commercial bank
activity both in static and dynamic context on the basis of complex integrative approach to formal and informal methods taking into account all types
of information, bank activities and its external environment.
Assessment and analysis of complex general condition and level of
Ukraine’s commercial bank’s economic security are carried out in this paper
by the following basic stages:
1. Investigation of the commercial bank’s economic security level
 Assessment and analysis of the commercial bank’s reliability level
(ES);
 Classification of the commercial banks according to the level of their
reliability.
2. Competitive environment analysis
 Analysis of peculiarities of the competitive environment;
 Estimating the level of influencing the state of the competitive environment.
This research is based on the methods of cluster analysis and evaluation of the integral rating [7; 8]. Rating evaluation have been realized by
the method of complete reduction, which is to reduce the number of characteristics that describe the activities of commercial banks. These methods
are divided into two groups: methods of generalized parameters and methods of reducing the number of characteristics. The first group of methods is
aimed at obtaining an integrated estimation of objects that have multicharacter nature in the form of some function f ( y1 , y2 , ..., yq ) which reflects the influence of characteristics, and in such way that makes possible
to organize researched objects. The essence of the second group of methods
is to replace the initial set of characteristics by set of diagnostic characteristics.
To assess the commercial banks’ economic security level and the
competitive environment is used method for constructing taxonomic index
level of development [7; 8]. Analysis of the competitive environment in the
regions is studied in order to determine the level of development of credit
unions and their level of influence on economic security. Consider the algorithm of the research more detail.
225
ДВНЗ “Українська академія банківської справи НБУ”
Step 1. Formation of the scorecard system. At this step indicators of
nearly 780 credit unions throughout the territory of Ukraine were chosen [2]:
 the number of credit unions in the region;
 the size loans to credit union members;
 the size of deposits on term accounts of credit union members;
 the membership of credit unions;
 the number of members in arrears on loans.
Step 2. Standardization of data. Because the values were expressed in
absolute and relative terms and have different units, the second step of the
procedure there was standardization carried out.
Step 3. Construction of standard. This step consists in the differentiation
characteristics of the data matrix on stimulants and deterrents. At this step
there were selected parameters, i.e. the reference value for each parameter of
the credit unions studied in order to determine a region the reference object.
Step 4. Determination of Euclidean distances between objects and
standard. At this step the similarity level of the indicators of credit unions
activity for each analyzed region with region-standard which was determined in the previous step is calculated, i.e. the distance from the standard
object to each of the studied regions is estimated.
Step 5. Calculation of integral index (taxonomic indicator). At this stage
the rate of the general level of credit unions in some regions of Ukraine is
calculated (Fig. 4).
The largest value of the integral indicator of the level of credit unions
was in Odessa region and Kyiv, the lowest in Sumy and Zhytomyr regions.
The value of the integral indicator of credit unions suggests that in
many areas there is almost the same level of development of the activity of
credit unions, and only some areas have a high enough level of development of credit unions, which means a high risk to the economic security of
banks that have major operations in those areas. For comparison of banks
and credit unions let us look at rankings of regions in terms of the amount
of banking institutions and the level of credit unions in each of the regions
of Ukraine (Fig. 5).
Analysis of the comparative statistics of the number of banking institutions and development credit unions in each region makes it possible to
distribute the following groups of Ukraine’s regions in terms of threats
level of Competitive Environment (Tab. 2).
In Fig. 6 regions are presented in order of the decreasing level of credit
unions and banks in terms of their reliability in every region of Ukraine.
226
Збірник наукових праць. 2012. Випуск 35
Integral indicator
0,6
0,5
0,4
0,3
0,2
7
8
Kyivska region.
Rіvnenska region.
Sumy region.
Zhitomirska region.
Chernіvetska region.
Hersonska region.
Mikolajvska region.
c. Sevastopol
Kіrovogradska region.
Khmelnytsky region.
Volinskiy region.
6
4
Vіnnitska region.
5
2 3
Ivano-Frankіvska region.
AP Cream
Poltava region.
Chernіgіvsk region.
Lugansk region.
Lviv region.
Zaporіzia region.
Zakarpatska region.
Ternopіlska region.
1
Dnіpropetrovska region.
Harkіv region.
0
Odesa region.
c. Kyiv
Donetsk region.
Cherkass region.
0,1
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Fig. 4. Integral indicator of credit unions by the regions of Ukraine
Rating of the number
of banking institutions
Rating of the integral indicator of the level
of developing credit unions
30
25
20
15
10
Sumy region.
Zhitomirska region.
Rіvnenska region.
Mikolaїvska region.
c. Sevastopol
Kіrovogradska region.
Chernіvetska region.
Kyivska region.
Hersonska region.
Volinskiy region.
Vіnnitska region.
Khmelnytsky region.
Ivano-Frankіvska region.
AP Cream
Poltava region.
Chernіgіvska region.
Dnіpropetrovska region.
Lugansk region.
Lviv region.
Zaporіzia region.
Zakarpatska region.
Ternopіlska region.
Cherkass region.
Harkіv region.
Donetsk region.
c. Kyiv
0
Odesa region.
5
Fig. 5. Top regions in the number of banking institutions
and the level of credit unions
Table 2
Threat Level of Competitive Environment for Commercial Banks
Low
Average
High
Kherson region, Mykolaiv region,
Sevastopol, Kirovograd region,
Chernivtsi region, Kiev region,
Rivne region, Sumy region,
Zhytomyr region
Ternopil region, Dnipropetrovsk
region, Ivano-Frankivsk region,
the Crimea, Poltava region, Chernihiv region, Vinnitsa region,
Khmelnitsky region, Volyn region
Odessa region, Kyiv, Donetsk
region, Cherkasy region,
Kharkiv region, Luhansk
region, Lviv region, Zaporozhye
region, Zacarpathian region
227
ДВНЗ “Українська академія банківської справи НБУ”
Number of banks with high level of reliability
Number of banks with satisfactory level of reliability
5
Cherkass region.
13
11
7
7
Zaporіzia region.
Zakarpatska
region.
22
11
19
11
4
13
Volinskiy region.
2
25
13
19
11
4
4
2
Khmelnytsky
region.
25
13
3
3
Vіnnitska region.
22
12
7
6
6
Poltava region.
27
13
5
5
AP Cream
Chernіgіvska
region.
24
13
9
Ivano-Frankivska
region.
23
12
8
3
3
Ternopіlska
region.
Dnіpropetrovska
region.
25
12
5
3
26
13
10
7
Lviv region.
26
20
11
Lugansk region.
29
13
6
6
Harkіv region.
27
16
13
11
6
Donetsk region.
21
12
4
5
20
11
7
Kyivska region.
8
21
11
27
12
4
3
20
13
4
4
2
24
12
4
4
region.
22
12
6
4
4
Kіrovogradska
region.
Chernіvetska
20
11
7
4
c. Sevastopol
20
11
3
Hersonska
region.
Mikolaїvska
region.
Zhitomirska
region
13
8
c. Kyiv
Sumy region
12
7
Odesa region.
Rіvnenska
region.
Number of banks with sufficient level of reliability
Number of banks with low level of reliability
21
11
5
6
22
11
7
12
18
Fig. 6. Rating regions by an integral combined measure
of development of credit unions
228
Збірник наукових праць. 2012. Випуск 35
The biggest development of credit unions as well as the largest number of banks in terms of reliability is in Odessa region. Zhytomyr region
has the lowest level of credit unions but not the least number of banks in
terms of reliability.
The greatest threat to credit unions present those commercial banks
that have a low or satisfactory level of reliability, because they produce a
large number of different loans from an easy delivery system, but can not
meet the full range of customer needs in lending, which leads to the fact
that credit unions gain dissatisfied customers to their union. This situation
economic security of the banks negatively affects.
With the emergence of the financial market more and more credit unions have a negative impact on the economic security of banks both of each
individual bank and the entire banking system.
Conclusion. Models of estimating and analyzing the competitive environment are built on the basis of researching Ukrainian credit unions and
are developed for each region of Ukraine that allowed to reveal the presence of the biggest threat to the economic security level of commercial
banks in Odessa region, and the lowest in Zhytomyr. Kharkiv region takes
the 5th place in the ranking in terms of threats in competitive enviroment.
Credit unions threat most those commercial banks that have a low or satisfactory level of reliability. The results of implementing models of multivariate analysis methods in researching the level of commercial banks economic security in Ukraine are the basis for developing common strategies
of economic security management of the Ukrainian banking sector.
Implementation of the developed set of models of analyzing of the
competitive environment of the banking economic security and its results
in the practice of commercial banks will enable raising the level of grounding managerial decisions concerning formation of strategic alternatives to
maintain the commercial banks viability and facilitate increasing its efficient activities.
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Отримано 15.08.2012
Анотація
У статті розроблено комплекс економіко-математичних моделей
багатовимірного аналізу конкурентного середовища економічної
безпеки банку, реалізація якого дозволить підвищити рівень
управлінських рішень щодо формування стратегічних альтернатив
розвитку та підвищення eфeктивнoсті діяльності. В основі реалізації
моделей оцінки та аналізу конкурентного середовища дослідження
стану кредитних спілок України та динаміки їх розвитку для кожного
регіону України.
230