Banks as professional stock market participants: role, functions and impact on the government bond market

Abstract

Banks, as professional participants in the stock market, play a key role in accumulating and redistributing investment resources, which is crucial for stimulating economic growth and developing the real sector of the economy. This role becomes particularly significant in the context of the globalization of financial markets, Ukraine's integration into global economic processes, and the ongoing Russian aggression against our country, which has led to an economic crisis. The effective functioning of the stock market and the proper execution of banks' functions as its professional participants are among the key factors in the recovery of the Ukrainian economy. Additionally, the processes of European integration and the opening of the domestic stock market to foreign investors require Ukrainian banks to comply with international standards and enhance the efficiency of their operations with securities. The study aims to conduct a comprehensive analysis of the theoretical and practical aspects of commercial banks' investment activities in the domestic stock market, identify key problems and shortcomings, and justify ways to improve the efficiency of such activities using innovative approaches. The research methods include comparative analysis to compare various approaches, classifications, and definitions related to banks' activities in the stock market. Statistical and econometric methods are used to analyze empirical data and identify trends in banks' activities in the stock market. Data from scientific publications, expert assessments, and official sources are used for a comprehensive analysis. The research results demonstrate that banks play an important and ambiguous role in the Ukrainian government securities market. On the one hand, they are key investors in government bonds, without which the state would not have been able to finance critical expenditures during the war. On the other hand, excessive expansion of government bonds in the banking system poses risks to the recovery of lending and economic growth in the future. The transformation of banks' business models from servicing public debt to normal economic lending is identified as one of the key challenges for monetary and fiscal policy in the post-war period. The proposed solutions to the identified problems are justified using innovative approaches. The conclusions emphasize the importance of using innovative approaches, such as the creation of digital platforms based on blockchain, the development of an open banking ecosystem, the implementation of robotic asset management systems based on artificial intelligence, and the application of the ESG concept for the development of the "green" and social bonds market. Future research prospects include analyzing the impact of banks as financial intermediaries on the government securities market and evaluating the effectiveness of their activities in the stock market.