Statistical Assessment of the Banks’ Competitiveness at the Financial Market: Theoretical and Methodological Aspect

The article is devoted to the vital problem of substantiating theoretical and methodological aspects of statistical assessment of the banks’ competitiveness at the financial market . The growing market competition makes the bankers chose competition methods by relating their business success to the business performance of their competitors, investors, corporate and private clients . The bank product competitiveness is assessed by comparing the economic parameters of an analyzed service with the benchmarking parameters, by group of parameters . A method based on the theory of effective competition is proposed for use as an option of the assessment of the competitiveness of a commercial bank . It enables for applying a universal method that allows for computing the integral coefficient of the competitiveness of a commercial bank by estimating the most important criteria of its operation The assessment of the bank competitiveness has to include an analysis of the internal environment, covering quantitative and qualitative characteristics of its operation, and an analysis of external environment . The assessment involves differential and complex methods of assessment. The assessment of the internal environment includes a quantitative analysis of its financial position and a qualitative analysis of its image and competitiveness of its services . The method enables to produce the integral coefficient of competitiveness; it is based on the assessment of the internal and external environment of the banks th a t are main competitors, by computing a number of criteria An analysis of the financial position of a bank is the central one, as it aims to produce a quantitative measure of the capacities promoting the development of a bank in future The main advantage of the proposed method for the assessment of the competitiveness of a commercial bank is its feasibility, because it is based on data from published reports and results of market analyses The comparative assessment of the operation of banks that are main competitors allows for quick and robust computation of each bank’s position at the financial market, whereas the results of the analysis give good idea of their business conditions and allow for the dynamic assessment of the effectiveness of the national bank system

The development of countries and regions is largely conditional on the existence and effective ope ration of the banking sector The economic activity in industries, the performance of small and medium business, the increased real m onetary incomes of the population are factor stim ulating financial organiza tions to expand the scopes and range of client services, introduce advanced technologies, enhance the quality of bank services and competitiveness Scientific publications are mostly confined to em phasizing th e need to introduce or improve statisti cal assessment of the banks' competitiveness at the financial market.B ut studies of problems involved in practical use of th e statistical m onitoring results for making decisions aimed at performance enhancem ent in banks are still lacking, which raises the importance of relevant themes at the current phase of the bank sector development in Ukraine [3;8].© Ya.V. Kolesnik, 2017 The article's objective is to highlight the theoreti cal and methodological aspect of the procedures of a statistical study of the banks' competitiveness The bank's competitiveness is determ ined by its capacities to operate in profit-making ways given the existence of a competitive m arket The integra tive index showing the effectiveness of utilization of all the categories of resources is formed by indicators of bank stability conditioned by the production and sales of competitive bank services As bank services are homogenous, all the entities operating at financial markets have to pu t emphasis on tariff policies as a significant factor of the competition Various methods for assessment of the com peti tiveness of commercial banks can be found now.Most of them are based on enclosed and hardly accessible data, thus complicating considerably the assessment process.Yet, far from all of them are capable of high lighting the essential meaning of the competitiveness because of incomplete coverage of its criteria [1].
An analysis of one sector, most often the financial one, or an assessment of the bank operation w ith over looking its qualitative characteristics obviously limits the practical significance of these methods when the assessment of the overall bank competitiveness is re quired Studies of various approaches to the assess m ent of its criteria lead us to conclude th a t a single and commonly acceptable structure of bank's com petitiveness indicators is yet to be built Due to the growing com petition at the financial market, bankers have to associate their business suc cess w ith business performance of their competitors, investors, corporate or private clients when deciding on the methods of competitive behavior Although driven by different goals, all of them seek for high quality assessment of the bank competitiveness, which should include comparisons w ith main com petitors The competitiveness can also be increased through the enhanced client services of banks, because a stable client base is a guarantee of the stable operation, and an efficient system for m anagement of client feedback is capable to improve the quality of client services by 50%.Also, th e competitiveness of a commercial bank as a financial interm ediary between m arket actors is largely dependent on the socio-economic stability in a country.The assessment of the bank's com petitive ness needs, therefore, cover the analysis of internal environment, including quantitative and qualitative param eters of its operation, and the analysis of the ex ternal environm ent It follows th at a single accurate criterion for the competitiveness assessment cannot exist Such inte gral indicator should cover absolute and relative ones; dynamic and static ones; objective and subjective ones The competitiveness of a bank product should be assessed by comparing its param eters w ith bench marking ones This comparison should be made by group of economic parameters Differential and com plex methods of are used in the assessment The differential m ethod for competitiveness as sessment is based on the comparison of individual param eters of products in question and benchm ark ing ones .W hen a need is taken as the benchmark, the individual param eter of the com petition should be com puted by the formula: ( 1) where Kg denotes the group indicator of com petitive ness by benchmarking parameters It should be noted th a t if at least one of the indi vidual indicators is equal to 0, i e a param eter does not conform to the obligatory norm, the group indica tor will also be equal to 0, and a product will be classi fied as a non-com petitive one The group indicator of competitiveness by eco nomic param eters is com puted by the formula: where k denotes individual param etrical indicator of the competition, by i param eter (i = 1, 2, . . ., n); A. denotes the value of i param eter for the product in question; A.(0) denotes the value of i param eter that needs to be achieved to have a need fully met In practices of banking the group indicator needs to be com puted using benchmarking parameters, by the formula: where Kge denotes the group indicator of com petitive ness by economic parameters; W denotes the weight of i param eter in the set of n economic parameters characterizing a need The value of this indicator measures the relevance of the bank service in question by the whole set of eco nomic param eters The weight of each economic pa ram eter is defined by expert assessment The primary tasks involved in the above problems are related w ith building and feasibility assessment of an all-purpose m ethod for com putation of the integral coefficient of the commercial bank's competitiveness by assessing its key operation criteria As an option of the com petitiveness assessment of a commercial bank, we offer a m ethod based on the theory of effective competition, by which a bank will be the most com petitive if it has the highest criteria of quality of assets and liabilities, sufficiency of capital, profitability, image and competitiveness of its services compared w ith its main com petitors operating in the com petitive environm ent similar to all the actors of the financial market .Built on the assessment of in ter nal and external environm ents of banks th at are main com petitors by com puting a num ber of criteria, this m ethod allows to derive the integral coefficient of competitiveness The components of the commercial bank's com petitiveness reflect quantitative and qualitative as pects of its operation and key internal and external factors of its success, which positive change signals the increasing stability of its competitive position at the financial market The assessment of the bank's internal environ m ent includes analysis of quantitative data on its fi nancial position and quality analysis of its image and competitiveness of its services The analysis of the bank's financial position is central one, as it aims to produce a quantitative measure of the capacity for fu ture development of a bank The analysis should be made using the computed indicators combined by the assessment criteria:

ТЕОРІЯ ТА МЕТОДОЛОГІЯ СТАТИСТИКИ
-quality of assets and liabilities; The nom enclature of indicators by each criterion -sufficiency of capital;and their role in the quantitative assessment of the ca -profitability of operation.

Indicator
The role in assessment Ratio of regulatory capital to risk-weighted assets The indicator measures the sufficiency of capital in deposit institutions, which determines the capacity of financial institutions to counteract shocks Ratio of regulatory capital of 1 level to risk-weighted assets The indicator measures the sufficiency of capital in deposit institutions on the concept of normative capital of the Basel Committee on Banking Supervision (according to the principles of Basel I and Basel II)

Ratio of non-valid assets without inclusion of reserves to capital
The indicator measures the sufficiency of capital; an important indicator of the capacity of bank capital to cover losses caused by bad loans Ratio of non-valid assets to total gross loans The indicator is used as a proxy to assess the quality of assets in a credit portfolio Profit rate on assets The indicator is designed for assessment of the bank profitability (the efficiency of assets) Profit rate on capital The indicator is designed for assessment of the capital efficiency in banks Ratio of liquid assets to total assets The indicator reflects inconsistencies between the liquid assets and liabilities and gives an idea of how deposit corporations can deal with the liquidity problems The liquidity level demonstrates the capacity of deposit corporations to counteract shocks Ratio of liquid assets short-term liabilities The indicator reflects inconsistencies between the liquid assets and liabilities and gives an idea of how deposit corporations can deal with the liquidity problems in short terms  The qualitative analysis the bank's competitive position is built on the assessment of two criteria: the image and the competitiveness of services The image is a key com petitive advantage of a bank, enabling for its success in present and future Banks may have various visions and approaches to creating and main taining the image, bu t each bank obviously seeks for the reputation of reliable, strong and effective busi ness partner It follows th a t the image assessment is a foremost phase in the analysis of the bank com peti tion The image assessment by the set of indicators is performed by an expert group who process data about a bank by an established scale After th at the indica tors are ranked by expert method, to derive the coef ficient of significance for each bank The assessment of the competitiveness of bank services is the key phase in the analysis of the bank operation, as its results are related w ith financial per formance and image The competitiveness of services is determ ined by two parameters: quality and price of services Their relationship is assessed by comparing the com petitive advantages of banks th a t are main com petitors as providers of high quality services with optimized prices This assessment is based on the com putation of quality and price coefficients using re spective indicators and building the function of "price -quality" correlation by the least square method.Its results are coefficients of the competitiveness by bank activity: lending, cash and settlem ent service, securi ties The sum of the coefficients constitutes the over all index of the competitiveness of bank's services, providing a criterion for the assessment of the internal environm ent in each bank [5].
At the same time, the bank's competitiveness de pends on not only its internal operation but on the external factors as well, which may have extremely negative effects for all the economic sectors, espe cially for banks The strongest ones are budget deficit, inflation, imbalanced effective demand and supply, living standards of the population, the development of advanced technologies, growth rate of GDP, the so cial development at region and country level These factors' effects may trigger problems w ith bank's li quidity and, consequently, w ith the competitiveness, if even the internal operation is flawless It shows th at the assessment of the external envi ronm ent of a bank is an im portant phase in the com petitiveness assessment, which includes the sequen tial analysis of indicators combined in the following groups: -the dynamics of living standards of the popula tion; -the dynamics of non-financial sectors; -the results of regulation .The analysis by the two former criteria should be conducted at region level, where a bank operates, whereas the analysis by the latter criterion should concern the financial condition at country level It should be noted th a t some indicators need to be com puted using the data from statistical reports, and others are produced by the official statistics of fice As regards the vector of indicators in question, all of them tend to maximum, and a special scale is constructed for their assessment Close correlation between macroeconomic indi cators used for com puting the criterion of economic regulation should be born in mind.Rate of refund ing, inflation and reserve ratio have different vectors determ ined by the objectives of m onetary policy in a given time.Today, the indicators in question have relatively low levels along w ith stable inflation rates Although good for banking business, this can provoke m onetary expansion followed by inflation growth Due to the complexity of analysis, ratios of the regu lation need to be assessed on the assumption about break-even operation of banks given equal bank rates .
It should be noted th a t the main advantage of this m ethod is accessibility, because it is built on data from published reports and results of market analysis Be ing built on the comparative assessment of the opera tion of banks th at are main competitors, the m ethod allows for quick and sound assessment of each bank's position at the financial market The competitiveness assessment includes analysis of the internal and external environm ent of a bank, and use of the various key criteria of bank operation enhances the quality of assessment Besides this, the competitiveness of bank services is assessed by nine activities, including the above m entioned lending, cash and settlem ent service, securities, plus emis sion, operations w ith paym ent and credit cards etc , enabling for an extensive analysis of the competitive advantages of the bank in question relative to other assessed banks It should be noted th at in the qualitative assess m ent of the bank's operation the criterion of the bank's share in the financial m arket tends to be overlooked Although this factor is considered as a competitive advantage, we believe th a t because it does not cor relate w ith the bank's financial efficiency, image or competitiveness of services, it cannot be an explicit criterion of the bank's competitiveness [4; 7].
We believe th at the above approach to translating quantitative indicators into scores by means of reduc tion coefficient taking into account maximal and m in imal values of the indicators of banks covered by the analysis is more appropriate than other benchmarks This m ethod for score assessment was selected as ap propriate as a result of analysis and practical applica tions of alternative approaches, conducted as part of this m ethod elaboration .Each indicator obviously has normatively fixed limitations, but the criterion level also exists, fixed by each bank w ith consideration to specific business conditions and strategic goals Therefore, the estimates derived for the analyzed banks may deviate widely from the norm ative values, because w hat is good for one bank may be absolutely inacceptable for another one This being born in mind, the conformity of financial estimates of the banks to the norm ative values was accounted for, but it was not taken as an essential of the algorithm for score assess m ent of the banks' operation It should be noted th a t once the norm ative values of the indicators are used, the competitiveness assess m ent can be performed for one bank, w ithout assess ing its com petitors We believe th a t a comparative analysis of the operation of the banks th at are main com petitors of one leader-bank would be incorrect due to the operational specifics and different strate gies of banks W hen the external environm ent of banks is as sessed, the reduction coefficient will be computed considering maximal and minimal values by year It should also be noted th a t the indicators for popula tion and non-financial sector of the economy reflect equal conditions for banks competing w ith each other in a given region, whereas the indicators for regula tion can be regarded as equal for the external environ m ent of all the domestic banks In view of the above, the assessment of the banks' competitiveness by the proposed m ethod involves collection and processing of various categories of data, allowing for the analysis of: • the financial efficiency, in particular the share of money invested in risky assets, the coverage of risky assets by equity; • the profitability of operation, the profitabi lity of services to private and corporate clients; • the development of priority activities; • the quality of services and the efficiency of tariff policy, and to have an idea of the banks' image, resulting from the assessment of its components: the reputation of director and the culture of customer service Once the above methodological aspects are con sidered, reliable results of the statistical assessment of the competitiveness of banks th a t are main com peti tors can be produced, and their competitive advan tages and disadvantages and positions at the financial m arket can be identified The analysis of external en vironm ent of the banks th a t are main com petitors lays the ground for evaluating the social and economic per formance of a region and its attractiveness for baking business Given the regular m onitoring of the internal and external environm ent of a bank and its com peti tors, this analysis can provide a comprehensive view of their business conditions and allow for evaluating the banking system efficiency over time The scientific study devoted to this topic includes a critical analysis of factors and criteria determining the bank's competitiveness Recommendations on competitiveness enhancem ent of the domestic bank ing system, i .e .its long-term operation efficiency, are elaborated .F urther statistical studies of the banking system will focus on problems associated w ith p racti cal im plementation of the results of statistical m oni toring, for taking management decisions on enhanc ing the bank performance R eferences 1.