Scientific Advisor – Stupak M.H.,
Chernivtsi Trade and Economics Institute of KNTEU,
THE BANKING SYSTEM OF UKRAINE IN A
The rise and development of Ukraine is a unique phenomenon in the modern history. From a single ‘ruble zone’ the national monetary and banking systems have separated. The elements and structure that earlier have not existed were given birth and are progressing: these are central banks and commercial banks‚ the national currencies‚ the systems of payments‚ currency exchanges‚ systems of the bodies engaged in regulation and bank supervision.
Playing a special role in the economic system as a whole and on the monetary-credit market, banks actively affect all the constituents of economic reform. It is the banking system that is to create the infrastructure, methods and tools of the new market-oriented regulation of the economy to replace the command-administrative methods and instruments.
At the stage of transition to a market-oriented economy, there are only a few factors that can equal an efficient system of management of financial and monetary-credit relations in importance.
The banking system in a market-oriented economy plays a triune role. First‚ the structure of commercial banks administers the system of payments. In developed market relations the colossal number of market transactions is accomplished by way of redistribution of funds between different banking deposits.
Second‚ together with other financial intermediaries, banks direct the savings of the public to firms and commercial enterprises. The effectiveness of the fulfillment of the process of investing funds mostly depends on the capability of the banking system of directing monetary resources to those loan debtors‚ who would find the opportunities to utilize them efficiently.
Third‚ acting in accordance with monetary-credit policy of the central bank‚ the banking system regulates the quantity of money in circulation.
Stable and temperate growth of money supply balanced along with the growth of commodity supply is a guarantee of the provision of a steady level of prices. As soon as this is achieved, market relations influence the economic system in the most effectual and gainful manner .
The rise and development of Ukraine’s banking system has proceeded in extremely adverse conditions. The most important of these include: the destruction of resources with respect to Ukrainian banks as part of a central Russia-based system in 1990-1991; the economic crisis‚ which manifested itself in the massive‚ powerful depression of production; the decline of gross domestic product, the keen decrease in the citizens’ incomes; and continued inflation. The tax pressure of 1994 also negatively affected banks. Another factor that affected the banking sector was the public attitude toward banks. These factors accompanied the transition process in Ukraine's economy for several years.
It is worth mentioning that in the terms of today’s economic crisis in the country, traditional credit transactions are not able to ensure banks their due level of profitability. This is the reason for an enhanced tendency to universalization of banking and creation of a full-fledged market for banker’s services . Among the high-priority directions of putting new services into practice, the following may be mentioned: trust transactions, consulting and informational services, accessory operations related to provision of economic activity of the clients, and improvement of traditional banker’s services, including deposit-loaning services.
At present, the issue of vital importance for Ukraine is to have a well-prepared banking system capable of attacking new challenges dealing with restructuring of the economy. For this purpose the economic policy should:
accelerate the growth of the economic potential of banks, by allowing accumulation of their own capital and release of their balances from the bad debts of state-owned enterprises;
defend banks from the interference of the state agencies that does not meet the requirements of existing banking laws, create the reliable system of insurance of banking deposits, and contribute to the formation of high confidence in banks by legal and physical persons;
create an effective legislative and regulatory basis for the activity of banks which would ensure a positive protection against risks and achievement of a high degree of stability in operations.
However, in spite of difficulties‚ the banking system of Ukraine has proceeded step by step in its evolution towards the stabilization of its role in the society and economy. It is obviously that without banks that are economically powerful, that can operate in a stable manner, that are aware of their mission in the market-oriented economy, and that have credibility in society, market-oriented reform in Ukraine will not be able to provide those beneficial impacts which are awaited by the public.