Bachelor's thesis (Turku University of Applied Sciences) Degree Program in Business Management

1 INTRODUCTION 
1.1 
Theoretical and practical value of current research 
While many of us understand the importance of banking and acknowledge its 
crucial impact on the development of financial markets, recent financial failures 
of many European countries have proven that required levels of attention to this 
matter have most likely been understated.
In order to raise the overall awareness about the problems and instabilities that 
accompany financial markets of various economic regions, I am planning to 
take a deeper insight into the way commercial banks diversify their activities 
among investment and lending practices.
In addition to exploring above mentioned ideas, I try to identify the ways with 
which financial intermediaries could safeguard their business operations and, 
thus, limit corresponding levels of exposure to investment and liquidity risks.
Consequently, while briefly outlining major researchers in this field and their 
most encompassing and related works, I aim to: 
provide a detailed summary of risk management strategies that 
would allow commercial banks to ensure stability of their 
everyday operations;
identify major investment opportunities for participants of 
contemporary banking industry;
create an excessive summary of valuable investment techniques 
that could be used as an introduction to the operations of financial 
markets;
supplement them with the information from direct representatives 
of major financial institutions in Finland and their unbiased annual 
reports. 

---

7 
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Artem Vorobyev 
1.2 Research purposes of the thesis work 
While taking into consideration everything mentioned above, it is safe for us to 
conclude that one of major primary research purposes of current Thesis project 
is to focus on possibilities for commercial banks to hedge the reliability of their 
business operations in times of ever-changing and increasingly volatile social, 
economic and political environments.
Therefore, it becomes evident that the described objective could be successfully 
accomplished by consecutive introduction and implementation of the following 
steps: 
To conduct a profound study of the general structure of financial 
markets;
To explore banking industry in terms of existing types of financial 
intermediaries;
To fully describe the role of commercial banks in the economy; 
To excessively outline the functions and structural activities of 
commercial banks; 
To consider and characterize basic daily operations of commercial 
banks and services rendered by them; 
To explain why it is imperative for commercial banks to engage in 
investment activities;
To identify financial instruments that in terms of commercial banking 
could be considered as primary investment strategies; 
To explore the field of investment risks and, thus, to mention major 
factors that increase potential future exposure to these risks in 
commercial banking; 
To outline a set of activities that would allow participants of the banking 
industry to implement better risk management strategies. 

---

8 
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Artem Vorobyev 
1.3 Structure of the thesis work 
Before I proceed with a more thorough exploration of some of the concepts 
described above, please note that the core part of the project is constituted by 
nine definitive chapters.
Therefore, it is important to mention that each chapter could be seen as a 
summary of several research purposes and, consequently, provides insights to 
the questions postulated by the key research objectives:
Why should commercial banks be seen as crucial participants of financial 
markets? 
Why is it so important for commercial banks to invest money? 
What are the risks that commercial banks face in the course of their 
investment activities? 
How can commercial banks manage these risks and maintain the fragile 
balance between interrelated concepts of liquidity (solvency) and 
profitability? 
How do explored theoretical frameworks correlate with contemporary 
commercial banking? 
While the first chapter is intended to serve primarily as an introduction, the 
“Methodology” deals with the foundations of several research processes and 
data collection techniques that were utilized in the course of the project.
Comparing research methods enables us to visualize the investigative process 
behind the Thesis paper, which leads to a better understanding of the ideas 
described in the following chapters. Same could be mentioned about the third 
instalment that expands upon theoretical concepts elaborately reviewed in 
Chapters 4-8. 
The fourth part of the Thesis revolves around the topic of financial markets in 
general. Questions concerning the definitions of key concepts related to 
financial markets are answered; and, while the functioning structure of financial 

---

9 
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Artem Vorobyev 
world is explained, I aim to identify main participants of financial markets and, 
thus, to establish their corresponding roles in various economic processes.
Starting with a brief, but comprehensive overview of the general concept of 
finance, I proceed to trace recent development trends in the history of 
contemporary financial markets and, therefore, try to present an unbiased 
overview of their crucial role in the well-being of contemporary economies.
Finally, the reader is faced with one of the definitive research questions of the 
chapter: how do rapid changes in financial markets affect banking industry in 
general and complicated operations of commercial banks in particular? 
Chapter 5 is dedicated to banking industry as a whole and allows differentiating 
commercial banks from other players of the banking sector, as well as 
explaining the nature of all Central Bank
’s operations. 
At last, the reader is getting acquainted with the structure and primary functions 
of commercial banks, as well as the roles that commercial banks carry out in 
implementation of macro-economic policies. In order to make a logical 
conclusion, major factors that are connected with core investment activities of 
commercial banks are presented. 
Chapter 6 is meant to present a sufficient overview of the following questions: 
why do commercial banks invest money and what are the major possibilities 
and investment techniques available to them? 
While the seventh chapter of the Thesis work expands upon ideas explored in 
previous parts, it does so by introducing the concepts of investment risks and, 
therefore, tries to describe most common investment hazards that commercial 
banks might face in the course of their business activities. As a logical follow up, 
I identify the key investment instruments that could be used as safeguard 
protection measures.
As the subsequent part is dedicated to empirical foundations behind the Thesis, 
it additionally serves as a possibility to explore the concepts presented in 
previous chapters. In particular, the readers are introduced to the project 

---

10 
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Artem Vorobyev 
questionnaire that has partly served as a source for the evaluation and 
measurement of various concepts described in the course of the research.
Moreover, it might as well be beneficial to touch upon the fact that, due to 
certain reasons that are later presented in Chapter 8, not all of the official 
bank’s representatives have been able to successfully complete the research 
survey.
In order to consolidate the content of the Thesis work with additional research 
data, annual reports of some financial intermediaries have been analysed and 
enclosed as a further supplement to the ideas mentioned.
In conclusion, the Chapter 9 acts as a finalizing summary of the findings that 
are meant to provide answers to key research questions stated in the 
introductory part of the project. The level of accomplishment of various study 
goals is also being analysed in order to measure the degree to which the 
described objectives have been achieved.