Ukranian banking system

Сontents:

INTRODUCTION                                                                                                            3                  

 

1. NATIONAL BANK – THE MAIN ELEMENT                                         5

OF THE UKRANIAN BANKING SYSTEM

 

2. FUNCTIONS AND ROLES                                                                        7

OF THE BANKING SYSTEM IN THE ECONOMY OF THE STATE

 

3. BUILDING FEATURES OF THE BANKING IN UKRAINE                  11

 

CONCLUSION 15

        REFERENCES 17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                               INTRODUCTION

Rather difficult to note how and when the first banks. The fact is that today the banks - are universal financial institutions that perform up to 300 species of various services. Because these services and facilities have not at one time and not in one place, it is hard to point out when there was banking. Has long been considered the most operations for saving money. Were doing or ecclesiastical institutions, or individuals. It should be noted that, in some cases, even in ancient world has made interest for money or property. Separately, there is a need to use the money. In the Middle Ages were traded coins of different countries, cities, and even individuals. All coins have a different weight, shape and size. Therefore needed specialists that need to keep track of.  These specialists are placed with their offices where there was the most developed trade. People, who are engaged in operations savings and moving money, understand that the collected wealth not used. If at least some portion of these funds to give temporary use, then you can be extracted from it. Thus, any loan (credit) transactions, which were based on allocation of funds for the period with a mandatory return and interest. The key to this was at home, vehicles, precious and valuable possessions, etc. All of these operations first existed separately, but only gradually, they were united in the organization that we used to call the banks. The word "bank" in a translation from the Italian "banco" means the table. In the UK, the capitalist banking system emerged in the seventeenth century, by the way the bankers out of the media masters goldsmith or merchants.

In our society, banks perform different types of operations. They not only organize the circulation of money and credit relations. After they are financing the economy, insurance operations, buying and selling securities, and in some cases, property management and brokerage services.

The banking system is the main component of the credit system. Under it means a series of different types of banks and non-banking institutions in their relationship that exists in a particular country at a particular time in history. Banks are an integral feature of the modern money economy, their activities are closely linked to the needs of reproduction. In modern society, the banks not only organize the money circulation and credit relations. After they are financing the economy, insurance operations, purchase and sale of securities, etc.

Bank - a stand-alone, independent credit institution having legal personality and exercising activities in the provision of financial and credit services. The Bank is an independent economic entity acting on the principles of cost accounting. Specificity is that banks operate in the exchange, rather than manufacturing. Central to their work is the organization of the process of monetary policy and monetary policy.

The current two-tier banking system was replaced by a hierarchy existed in the USSR (one-tier) banking system. And currently operating in the country the National Bank of Ukraine - structure created in 1991 and represents the upper level of the banking system and a network of commercial banks, the composition and the number of which varies considerably over time. Of the banking system is regulated by the Law "On Banks and Banking Activity" dated December 7, 2000

Thus, the purpose of this course is to study the Ukrainian banking system and its role in economic development. You must solve the following problems: first, to determine the nature of the banking system, and secondly, its place and role in the economy of the state, and thirdly, to characterize the level of development in Ukraine, including consideration of its main elements - the National Bank of Ukraine.

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       

 

 

         1. National Bank - the main element of the Ukrainian banking system

Creation of a new banking system in Ukraine based on state banks began in 1991 with the enactment of the "Land" On banks and banking activity ", according to which the foundations were laid for the classical two-tier banking system, which includes upper and lower levels, and to determine which banks belong to each of the levels and what will be the mechanism for communication between them.

As a result of the disintegration of the former Soviet Union, the Ukrainian branch of the State Bank of the USSR was forced to take a decision on the allocation of appropriations, since the Federal Bank has not prepared a plan of credits at the beginning of 1991. On the basis of the Ukrainian Republican branch of the State Bank of the USSR established the National Bank of Ukraine (NBU). In the summer of 1991 instructions of the Union State Bank had no binding effect in Ukraine, December 25, 1991 the State Bank of the USSR was formally dissolved and the National Bank of Ukraine has become the central bank.

The Act provides for the operation of a two-tier banking system, in which the National Bank would act as a central bank and other banks would carry out commercial banking operations.

National Bank - a bank first level. It performs the traditional functions that are characteristic of the central bank of the state: this issue and settlement center of the state, the bank of banks and the government's banker. NBU is not independent. It is subordinate to the Supreme Rada and the Cabinet of Ministers of Ukraine.

With the adoption of the law "On the National Bank" (May 1999) in Ukraine has clearly defined the status of the central bank, its functions are separated from the functions of commercial banks.

Consequently NBU - is:

• single emission center of the country, he has the right to manopolnim note issue, the organization and regulation of the circulation of money;

• bank banks. It does not take credit and settlement services to banks and other credit institutions, does not issue loans to commercial banks, does not organize the mechanism of interbank lending;

• Bank of the government. NBU is engaged in lending and settlement services yauryadu - is its cashier operates on osblugovuvannyu vntrіshnogo debt. Is a financial consultant and t.і. National Bank conducts auctions ps \ ozmіschennyu government bonds of the Ukrainian government, engaged in their repayment and vіdstkіv them, I follow the cash budget implementation by commercial banks;

• the official guide monetary policy, said the purpose and direction of monetary policy, which are related to ensuring stability of the national currency. It carries out the regulation of the national currency relative to the currencies of other countries through foreign exchange interventions in the open market;

• Managing foreign exchange reserves of the State;

• A representative of the State in international financial and credit institutions.

The NBU imposed function monitoring of the commercial banks of the banking law, the observance of prudential regulations. He carries out the state registration of banks and credit institutions, as well as licensing bankіvskih operations, sets their only rules of operations, accounting, information security and resources.

However, the strategic objectives and the overriding duty of the NBU is to create a supportive environment in which the actions of commercial banks and other financial institutions. This means that the main objective of the National Bank of Ukraine are:

1) to protect and ensure the stability of the currency of Ukraine;

2) the development and strengthening of the banking system;

3) ensuring effective and smooth functioning of the settlement system. Reliable payment system that meets the needs of businesses and individuals in a safe and efficient transfer of funds - a prerequisite of successful development of a market economy in each country;

4) establishing and maintaining a competitive environment;

5) Promote the use of new tools of monetary policy.

A significant achievement was the introduction of elektornnyh interbank payments. Another progressive step is the introduction of an e-mail, that the NBU can receive a daily balance of the banking system.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. FUNCTIONS AND ROLES OF THE BANKING SYSTEM IN THE ECONOMY OF THE STATE   

The role and importance to the economy of the state of the banking system is manifested in its specific purpose and function.

The main purpose of the activities of individual banks is profit. As for the banking system, this goal is not only not increased in proportion to the number of banks that are part of the system, and generally moves to the background, remaining only to individual banks. The first place in the system out of a target [8]:

• ensuring public oversight and regulation of banking activities in order to coordinate the interests of individual banks to the public interest;

• ensuring the reliability and stability of the banking system to stabilize money and uninterrupted service economy.

None of these goals can not afford individual bank, no matter how economically powerful it is. Only coordinated combining them into a system tailored to the stated objectives, the attainment of the real.

No less expressively shows distinct features of the banking system as a separate structure from the functions of the individual banks.

The banking system is able to perform three such functions:

• transformational;

• creation of means of payment and management of cash flow (equity);

• the stability of banking and money market (stabilizing).

Transformative function of the banking system is based on a similar function of individual banks. However, it is not the sum of the mechanical preparation of such a function of all the banks that are part of the system. On the scale of a qualitatively new feature transformation - the larger, deeper, more complete and effective than the sum of the transformational potential of individual banks. This presupposes two things [11]:

• First, the transformation process is actively involved the central bank. The bank of banks, he actively performs all types of transformation processes in the interbank level. Through the mechanisms of refinancing (credit auctions, lending through the "discount window", "Lombard window" direct lending of individual banks, etc.), the central bank money market transforms resources and timing, and the size, and the risks, and in regional aspect, and even on a larger scale than the individual commercial banks. It completes the transformation processes within the entire money market started as a direct commercial banks;

• Secondly, the system significantly improves the transformational potential of niche banks. Built into the system, they are able to perform this function in cooperation with the universal banks. If a bank, for example, the Savings Bank of Ukraine, specializing in deposit operations, then in the system, it can offer the raised funds to banks that perform credit transactions. Together as a composite of these banks can provide the full range of the transformation of money capital in the market.

Function to create the means of payment and management of cash flow (emission) is that the banking system is rapidly changing the mass of money in circulation, increasing or decreasing it according to the change in money demand. In other words, the banking system controls the money supply. [7]

This is a key feature of the banking system. Its implementation involves all elements of the system - the central bank, all the banks of the second level. It applies to all areas of banking, particularly credit.

This feature of the banking system is qualitatively different from the same function of an individual bank. Every single bank has the potential to be involved in the formation of the money supply and interest to expand its operations this because it gives them additional income. But the system can determine the boundaries of this activity, which is adequate to the demand for money, and introduce these limits emission function of each bank. This is achieved by methods and tools of monetary policy of the central bank, the implementation of which ensures the system as a whole.

Function to ensure stability of banking and money market (stabilization) is associated with an extremely high risk banking. Banks, in contrast to other entities, contain high risks destabilizing their own activity, disorder of the money market, provoking a general economic crisis. Therefore, each individual bank can not perform stabilizing functions, but rather on the turnover. [4]

As intermediaries in the money market, banks operate primarily through other people's capital - equity funds attracted investors and loans from other banks. Therefore, they are under constant control and pressure from the large number of customers and shareholders whose actions are determined not only by economic calculations, but also rumors, expectations, assumptions. Therefore, the banks constantly hanging threat of panic, which can cause a landslide withdrawal of deposits and bankruptcy, if the process fails to stop. In addition, under pressure from his creditors and owners of banks are forced to invest in higher-yielding, but illiquid assets, the risk of losing the confidence of depositors and cause panic. Provide high confidence in banks - a problem not only of individual banks and the entire banking system.

Banks - not only intermediaries in the market, and companies that can "make money" by providing loans to its customers. This is probably the most highly profitable form of production, and the banks are constantly hovers great "temptation" to "earn" and offer more money than they have for this reason there is and what it is necessary for the market. This provision addresses the commercial and central banks. However, this behavior is not determined by the pursuit of profit, and the economic or political situation prevailing in the country.

As mediators of the money market, banks should take all the responsibility to the investors for the economic risk of its customers. Banks, potentially, thanks to the wide scope of its activities, can disperse these risks and mitigate them as investors. However, the real success of this can only be achieved provided that the objective will be the efforts of the entire banking system. Only the banking system in general able to create a valid insurance mechanism bank risk and bank deposits.

Implementation of the banking system stabilization function is manifested in two ways: in the adoption of laws and regulations that govern the activities of all its components - from the central bank to a highly specialized commercial banks on the one hand and on the other - to create a working mechanism of state control and supervision of compliance with these laws and the activities of banks in general.

On this basis, a special mechanism to ensure the stability of the banking activities, which include [11]:

• insurance of bank risks, particularly credit;

• insurance of bank deposits, primarily individuals;

• Creation of intra reserves to cover the damage from the credit risks;

• Establishment of a mechanism required reserve bank deposits;

• the establishment of a centralized economic standards in the areas of banking activities that are associated with the highest risk;

• a centralized supervision and control of banking activities;

• Creating a centralized mechanism for refinancing commercial banks;

• legalization of different mechanisms of centralization of bank capital (consortia, cartels, trusts, corporations, holding companies).

Consortium - a temporary voluntary association of several banks for the overall implementation of certain actions that individual bank can not afford (lending large projects, placement of large issues of securities, etc.). After achieving goals can fall apart. Each bank retains legal independence. This character has a syndicate.

The cartel is an agreement between a few large banks about a uniform policy in the money market (interest rate, credit, dividend, etc.). Bank independence is preserved. Concern is the union of banks led by one of them, who became majority owner of the other banks. In this association of independent banks significantly restricted, although they are joint-stock companies. Bank holding company is usually called the concern, of which, apart from banks, are non-bank financial intermediaries (insurance, financial, leasing companies, etc.). Trust - is a monopoly association of banks through the merger of their property. Ownership of stock in the converted shares, and some banks are losing legal and economic independence and guided from one center as branches.). [8]

These events provide institutional and legal framework of the stabilization function of the banking system. Each of them can only be realized within the system and is specific infrastructure element that turns a set of banks in a qualitatively new phenomenon - the banking system.                                                              

 

   3. BUILDING FEATURES OF THE BANKING IN UKRAINE

Formation of the Ukrainian banking system began with the declaration of independence and secession from the USSR in 1991, Prior to that time in Ukraine does not have the necessary conditions for the existence of an independent banking system. Most banking institutions that operate in its territory at the end of 80 years, were not independent banks and the branches of the Union Bank. They were part of the banking system of the Soviet Union and managed by the Union center. Most union banking system was not a market, and therefore after the proclamation of the policy of perestroika in 1988, began actively to reform, including in Ukraine. However, the task of creating a complete banking systems in each union republic in the days of the Union is not the case, albeit dealt with the formation of the central banks in each of the countries. In particular, in 1990 began the development of the Law of Ukraine "On Banks and Banking". But the most probable was meant to reorganize itself allied Central Bank (State Bank of the USSR), something like the U.S. Federal Reserve, not to build independent banking system in each country.

Start building in Ukraine's own market-based banking system was the Law "On Banks and Banking Activity", adopted by the Verkhovna Rada of March 20, 1991 is based on the banking system of Ukraine This law, the principle, recognized in the world [1]:

• a two-tier structure;

• clear functional separation between banks first and second levels;

• functioning of the banks on commercial and contractual arrangements with customers;

• elimination of the state monopoly on banking, commercial banks' ability to create different forms of ownership, the liberalization of banking activities;

• The organization of state control and supervision of the banking and the imposition of this problem on the central bank;

• The independence of the central bank of the state executive power;

• Creating a system-wide infrastructure for banking, etc.

Formed on the Act legal and conceptual framework of Ukraine's banking system in a short time was difficult, but very effective way of development. Economic importance of the banking sector in Ukraine is particularly noticeable drop in 1994-1995. One of the hallmarks of this stage - a low level of bank management. This led to a banking crisis and the bankruptcy of some banks. During 1994, 12 banks went bankrupt. In 1995, 20 banks were transferred to the state of the recovery. Throughout 1996, 45 banks went bankrupt (direct bankrotsvo), and 60 arrived in a state of recovery (hidden bankrotsvo). According to the National Bank of Ukraine, the number of problem banks is 28. In early 1998, 23 banks were the rehabilitation procedure, 16 to be closed, 12 - were declared bankrupt.

These figures indicate an increase in the Ukrainian banking system, the incidence of insolvency. In the period of 1994-1995 years there was a change of shareholders of many banks that sell and resale of commercial banks and their affiliates.

The stabilization of the inflation rate accelerated the bankruptcy of commercial banks. The main shortcomings of the banking system of Ukraine remain [8]:

• Lack of capital stock in most of the banks;

• control of interest rates by refinancing the NBU;

• access to free state loans;

• preferred mode of operation for individual commercial banks;

• lack of compliance with the principles in effect for the banking business;

• lack of competition in the credit sector.

Today in Ukraine there are 15 commercial banks with mixed capital, of which five banks have a 100% foreign capital and registered as Ukrainian entities. This "Credit Lionis" (French capital)), "Societe General" (the French capital), Deposit and Credit Bank (Polish capital), ING Bank and "Credit Suisse". The remaining 12 banks are only part of the foreign capital in its authorized capital. In addition, now in Ukraine there are 22 representative offices of foreign banks.

In Kiev and the Kiev region are 78 banks in Kharkiv and Odessa - 15 in Donetsk - 14, in the Crimea and Dnepropetrovsk region - 12 in Lviv - 10. At the same time, in Vinnitsa and Kirovograd regions there are no commercial banks. Table 1 shows the dynamics of development of the banking system of Ukraine. Placement of the territory of the extremely uneven.

Certain progress has been made in the functional development of the banking system. National Bank as the central bank basically mastered rather complex mechanism of monetary regulation and dosyag significant progress in stabilizing the national currency, had organized in September 1996, the completion of the currency reform. NBU has accumulated positive experience in other areas of activity - in the regulation of currency relations, state debt arranging bank account according to international standards, regulatory and methodological support of the commercial banks and the like. Greatly expanded the scope of functioning of commercial banks, and they have gained valuable experience not only in the traditional areas, but also in their new areas of activity - in the stock and currency markets, in international relations, in the interbank market, in relations with the central bank, in bank management and the like.

However, the formation of the Ukrainian banking system constantly stumbles into serious obstacles that are not only hampered the process, and often simply bring him back. This is particularly true of a deep systemic crisis facing the economy of Ukraine during the transition period. It manifested itself in a long decline in real output, in the chronic imbalance of the state budget in a deep ice arrears (at the beginning of 2000 the mutual debts of economic entities exceeded the annual GDP), an all-time high inflation, which has experienced Ukraine in 1992-1994., and its corollary, levels fall monetizatsії economy. All of these processes lead to the loss of money capital business structures, particularly in the small and medium business, collapse of this very important for the development of banking sector, strengthening of the negative for bankіvnitstva processes as barterizatsіya, tіnіzatsіya dollarization and economic relations and flow of free capital for border, falling efficiency of production (at the beginning of 2000, about 60% of enterprises in all sectors of the economy operated at a loss). [10]

In these circumstances, in Ukraine very slowly evolving demand for mediation services of banks, and then there was no economic prerequisites for the proper development of the banking system. Therefore, despite the significant growth of key quantitative indicators of its activity, the overall level of development of the Ukrainian banking system, especially given the banking systems in developed countries, there is very low. This is confirmed by the data set forth below, which characterize the qualitative aspects of the banking system of Ukraine.

Is inadequate capitalization of commercial banks. The total amount of equity capital of all commercial banks in Ukraine on January 1, 2000 amounted to 1116.4 million. On average, a single bank account for 6.85 million dollars. Against the background of the leading banks in the world kapitaloobespechennost Ukrainian banks had so that none of the Ukrainian banks are not included in the list of the first thousand banks in the world, published by the British magazine "The Vanker" in 1994 and the situation has not changed at the beginning of 2000 for the largest The indicator Bank of Ukraine - Prominvestbank - had at the beginning of 2000 of U.S. $ 128.4 million of equity capital, while the latter bank thousandth of a list already in 1994 was 125.0 million. Therefore, Ukrainian banks will be hard to compete with foreign, not only in the global market, but also in Ukraine, if the latter decide to seriously foothold in our market. [10]

Solve the problem of administrative pressure on banks (increasing minimum capital fund, increasing the requirements for capitalization of profits, etc.), since the profitability of banks in recent years has steadily decreased, the attractiveness of the banking business for investors diminishes and the necessary internal financial capital remains limited. Solve the problem of banks' capitalization is possible only in accelerating the market transformation of the economy, its efficiency, public finances and improve the profitability of banks.

Poor credit predominant part of the borrowing enterprises, low capitalization, lack of management are the cause of their extremely high risks of banking activity, increased mistrust of banks, particularly from the family sector of the economy makes it difficult to support their liquidity. All this weakens the mediating role and transformative function of banks and the banking system as a whole. Banks are to adequately meet the demand for loan capital, primarily by the subjects of the real sector of the economy that is constantly experiencing a profound shortage of money as a means of payment and as capital. 3 On the other hand, all the economic actors, in which there are free money, they can not reliably place and prefer to convert into foreign currency investments in the underground economy or transferred abroad.

Long acting deep crisis of public finance also affects the formation of the banking system, inhibits the formation of a purely market mechanism of banking regulation, the establishment of civilized relations between the commercial banks. NBU forced the major part of his senerazha directed to monetization of the budget deficit, limiting to a minimum the refinancing of commercial banks. Through artificially drive interest rates on T-bills the banks are forced to direct their resources primarily in government securities as the most profitable assets, restricting lending to the real economy.

In conditions of high inflation forced the NBU for a long time (1994-2000 gg.) Restriction to a tight monetary policy, which is also not to assist the formation of the banking system of market type. 3 of one hand, such a policy is holding back the process re-monetization of the economy, the formation of free money capital, money market, which narrows the economic base of the intermediary banks. On the other hand, the NBU has to frequently switch to "manual" guide money market, using the most stringent, and even direct administrative measures monetary regulation for which the interests of the monetary policy is not in the interest of commercial banks.

                                                       CONCLUSION

The banking system is a major part of the credit of the State. It consists of two levels: the first in Ukraine by the National Bank of Ukraine, the second - the commercial banks. The essence of the banking system is the system of relationships in the banking market, which allows to handle money circulation and thus - to support the functioning of the economy of the state.

The role of the banking system in the economy is determined by its functional characteristics. Although the banking system of Ukraine and built functionally independent of any sector of the economy, its relationship with other branches of the economy are undeniable, and sometimes even decisive. Thus, the banking system is the main source of funds urgently needed for the functioning of various economic subsystems. She is involved in the distribution and redistribution of wealth through the credit system tools. In addition, the banking system now takes over a greater part of cash flow, bringing it into the sphere of non-cash payments.

During the subsequent development of the Ukrainian banking system should not only could not be greater use of foreign experience, but do not forget the historical features of the country.

Today, Ukrainian banks have shifted to the international standards of accounting and reporting, but the work in this direction is not over. The use of modern accounting standards and folding sheets, and regular publication of balance sheets, profit and loss statement will promote greater transparency in the banking system, and gradually increase the confidence in the banks. Therefore, we can conclude that the reform of the banking system of Ukraine today produced tangible results for the national economy and the restructuring of society. At the same time, the coordinated interaction of all sectors of the economy can only be achieved through economic growth. Then the banks will be able to effectively perform their tasks, which stood in front of them at the stage of transformation.

The commercial banks directly covers all areas of the market economy - production, distribution, exchange and consumption. There is not a single organization or entity that would not have been a customer of credit institutions. That credit is a factor that greatly ensures the continuity of the extended reconstruction of the economy.

Through bank loans solved the contradiction between the amount of the funds released from the lender, and the size of the needs of the borrower. In these circumstances, with the economy monetary and commodity relations are increasingly transformed into monetary essentially acquired leveraged nature. This is based on the huge role of credit and commercial banks to provide it as the main carriers of credit relations for the effective functioning of the economy as a whole.

Summing up all the work for one can say that the domestic banking system is going through hard times. The reason for this is the increased competition between banks, unstable socio - economic situation, imperfect and constantly changing legislation, and risky lending policies of many banks in the pursuit of high profits.

In connection with this state-sector lending basic proposal for the further development and improvement of the banking system of Ukraine is the diversification of investment banks' resources and the expansion of services to clients, the conversion fees from client operations in one of the main sources of income of commercial banks.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                     REFERENCES

1. The Law of Ukraine dated 07.12.2000 "On Banks and Banking".

2. Bank Reference: Navch. Posіb. / In the red. prof. R. I. Tirkala. - Ternopil: Carte Blanche, 2001. - 314 p.

3. Bank management. For red. OA Kirichenko. - K.: Knowledge-Pres, 2002, - 438 p.

4. Banks and banking operations: Tutorial / Ed. EF Zhukov. - M.: UNITY. Banks and Exchange 2007. - 264.

5. Banking / Ed. GN Beloglazova and LP Krolivetskoy. - St.: Peter, 2002. - 384 p.

6. Vovchak OD Bank Reference: Ukraine: problems and prospects of development of the financial Ukraine. - 2003. - №  10. - S. 118 - 125.

7. Money and credit: Pіdruchnik / M.І. Savluk, AM Frost, MF Pudovkіna that іn.; For zag. Ed. M.І. Savluk. - K.: KNEU, 2001. - 602 p.

8. Money, credit, banks are: Tutorial / Ed. OI Lavrushina. - D34, 2nd ed., Rev. and add. - Moscow: Finance and Statistics, 2000. - 464.: ill.

9. Slutty L. Commercial banks in the financial services industry. - 2000. - № 5. - S. 43 - 45.

10. http://www.bank.gov.ua/ Official Website of the National Bank of Ukraine.