Economic
sciences/Banks and banking system
Boyko A.I., Teutul
O.V.
Bukovyna State University of
Finance and Economics
Comparison
of the banking system of Ukraine and American
banking system
Banking system is an aggregate of national and commercial banks,
which operate within the framework of general money-and-credit mechanism. We
would like to give an outline of the banking system of Ukraine and American
banking system.
The
banking system of Ukraine was founded after the adoption of the Law of Ukraine
“On Banks and Banking Activities” by
the Verkhovna Rada of Ukraine in March
1991 [1,p.110]. It is two-level and consists of the National Bank of Ukraine and banks of various types and forms
of ownership and in the USA, American banking system consists of Federal Reserve System and four types of
commercial banks and organizations: saving and loan association, commercial
banks, Credit Union and mutual saving banks. National Bank of Ukraine is the central bank of Ukraine
whereas in the USA it is called the Federal Reserve system, which was created
in 1913.The Federal Reserve System's structure is composed of the
presidentially appointed Board of Governors (or Federal Reserve Board), the
Federal Open Market Committee (FOMC), twelve regional Federal Reserve Banks
located in major cities throughout the nation, numerous privately owned U.S.
member banks and various advisory councils, while National Bank of Ukraine is
single-structured. The FOMC is the
committee responsible for setting monetary policy and consists of all seven
members of the Board of Governors and the twelve regional bank presidents,
though only five bank presidents vote at any given time [3,p.55].
We have
defined the National Bank of Ukraine and the Federal Reserve System have common
functions:
-
issuing the national currency;
-
managing the nation's money
supply through monetary policy;
-
managing money creation;
-
maintaining the stability of the
financial system and containing systemic risk in financial markets;
-
analyzing the state of
money-and-credit, financial, price and currency relations;
-
coordination and supervision of the whole banking system:
-
representing nation interests in central banks of other states;
-
extending credit to member banks.
These features are the basis of
effective economy, social position and development of financial market and all
the state. They help to maintain the stability of national currency, which is
most important for all the countries.
At the same time
these kinds of national banks have different functions too. The National Bank
of Ukraine also carries out the following functions:
-
compiling, analyzing and forecasting the balance of payments;
-
taking part in the training of personnel for Ukraine's banking system;
-
keeping a Register of banks;
-
determining the areas of the development of modern electronic
banking technologies,
establishing, coordinating and controlling the creation of electronic
means of payment, payment system;
-
carrying out the certification of auditors, which will conduct the
verification of banks, temporal administrators and liquidators of bank;
-
realizing a public policy on questions defense of state secrets in the
system of the National bank;
-
determining the system, order and forms of payments, including between
banks[4,p.235].
American banks have not such functions
because it is not foreseen a legislation, their economy is more developed and
American banks use other instruments of adjusting their economy.
Whereas other functions of the Federal Reserve System include:
-
granting of financial services to depositary, including to the
government of the United States of America and official international
establishments;
-
removing the problems with liquidity at local level;
-
processing the cheques [6,p.37]
In Ukraine, cheques are in turn and
Ukrainian banks use them for operation. Cheques are issued in America and sent
to Ukraine. Cheques are processed only in America.
In it’s role as the
central bank of the United States serves as a banker's bank and as the
government's bank. As the banker's bank, it helps to assure the safety and
efficiency of the payments system. As the government's bank, or fiscal agent,
the central bank processes a variety of financial transactions involving
trillions of dollars.[3]. The main function of National Bank of Ukraine is to
ensure the stability of Ukraine's monetary unit. The most important duties of
the Federal Reserve authorities relate primarily to the maintenance of monetary
and credit conditions favorable to sound business activity in all
fields—agricultural, industrial, and commercial.
Commercial banks of Ukraine are the
second level. There are about 230 commercial banks in Ukraine. Saving Bank and
Ukrainian Export-Import Bank are state-owned. Commercial banks are engaged in
the following activities:
-
credit creation;
-
accepting deposits;
-
transferring money;
-
exchanging currency;
-
cash management and treasury;
-
making advances;
-
purchasing and selling securities;
-
providing various cards such as credit cards, debit cards, Smart
cards[2,p.265].
The largest commercial banks
of USA, Bank of America Corp, JP Morgan
Chase & Co, HSBC Bank, Citigroup, and Goldman Sachs Group accounted for 96
percent of all exposures and had the largest share of derivative exposures of
the commercial banking sector in the United States. Functions of American
commercial banks are:
-
accepting deposits;
-
credit creation;
-
wealth and investment managing;
-
brokeraging;
-
transaction services;
-
insurance;
-
mortgage;
-
providing various cards[7,p.144].
Therefore, we can trace that some
functions of American commercial banks are the same ones as of Ukrainian commercial banks. But few features
of American banks are not developed in
Ukraine. For example, insurance and mortrage. Ukrainian economy is not stable,
there is a high rate of inflation and people have not got so much money for
being small investors.
The primary function of savings
and loan associations, as the second type of commercial banks of U.S., is the
financing of long-term residential mortgages. Savings and loan associations
accept deposits in savings accounts, pay interest on these accounts, and make
loans to residential home buyers. Savings and loan associations are primarily
involved in making residential loans. They do not make business loans of any kind,
nor do they provide many of the other business services one finds in commercial
banks.[5,p.298].
Comparing with Ukraine, there are commercial banks which carry
out deposit and credit function, but also there are saving banks which take
deposits from physical and legal entities and give consumer credits.
A mutual savings bank
is included in the banking system of
the USA, and it’s financial institution chartered by a central or
regional government, without capital stock, that is owned by its members who
subscribe to a common fund.
The banking sector of Ukraine has a ramified system of
correspondent accounts in foreign banks- about 3,800 accounts with 153 foreign
banks[1,p.117].
As for American banking system, it is developed and has wide
relations with other countries. Many countries use their currency, while the
USA gives large loans in dollars and
these states are dependant on the USA now.
Drawing conclusion, the banking system is vitally important
for every country in the world. As for the banking system of Ukraine and American banking system, both of
them have advantages and disadvantages. The national currency of Ukraine,
hryvnia, is not as stable as dollar. Dollar converting in the World Market, is
used in many countries for payment. In a counterbalance, hryvnia is not used in
the international payment. There are high interest rates in Ukrainian banking
system. People can not pay their loans, so many credits transform to doubtful
credits. American banks are controlled so it helps to develop their economy.
There is competition between Ukrainian banks and as a result national banks have a wider range of services than
American banks.
Literature:
1. V. Bebykh. English
for Students of Finance and Economics, area publishing house, enterprise of Yavorskiy S.N. -2005.
2. The Law of Ukraine
“On Banks and Banking Activities”- 07.12.2000.
3. Jesus Huerta De
Soto. Money, Bank Credit, and Economic Cycles, Ludwig von Mises Institute-2006.
4. www.bank.gov.ua
5. www.federalreserve.gov
6. www.federalreserveonline.org
7. www.mapsofworld.com