Economic science/ Banks and banking system
PhD, D. Gaidukovich
Odessa National Economic University
REFORM OF THE BANKING SYSTEM OF UKRAINE IN TERMS OF
GLOBAL FINANCIAL CHALLENGES
In recent years there has been a clear trend towards increasing economic
and political instability at national, regional and global levels. The banking
systems that accumulate political, macroeconomic and institutional risks in
terms of increasing instability are in the worst situation. Moreover, the
instability in the banking sector leads to negative consequences in the economic
development as a whole, and in some cases provokes social and political crisis.
Domestic banks stand a serious test under the conditions of permanent
economic transformations. Rapidly changing operating conditions, the impact of
the environment, the necessity of internal transformations lead to continuous
improvement of the banking system. The level of economic development of any
country is largely dependent on the banking system development.
The effective functioning of the banking system is a necessary condition
for the development of market relations in Ukraine that objectively define the
main role of the central bank's banking regulations. The National Bank of
Ukraine is making efforts to implement the main strategic objective, which is
defined by the legislation - to ensure stability of the national currency by means
of targeted monetary policy aimed at macroeconomic stabilization and inflation
control [1, p. 5].
Based on the definition of "banking
system" it is appropriate to distinguish two main approaches -
institutional and institutional and economic.
Institutional approach involves determining the banking system as a set
of banks that constitute it. A.M. Moroz considers the banking system as a net
of various types of banking institutions and other credit institutions in their
relationship, which exist in a particular country at a particular historical
period, operate within the only financial mechanism and are a part of the
financial system of investment [2] .
This approach to the definition of the essence of the banking system can
be traced in national legislation. Thus, according to the Law of Ukraine
"On Banks and Banking" the banking system of Ukraine consists of the
National Bank of Ukraine and other banks and branches of foreign banks which
are established and operate in Ukraine in accordance with the provisions of
this Act. [3]
Note that according to this approach the banking system is only a set of
banks that are a part of the credit system. However, as noted by O.A. Epifanov,
the banking system does not occur due to mechanical combination of individual
banks, but it is based on the preconceived concept , according to it each type
of banks and each individual bank hold a certain place. The structure of the
banking system depends on the specific socio-economic relations in the country.
[4]
Thus, the institutional economic approach involves consideration of the
banking system, based on the economic, legal and organizational conditions that
determine the need for consistently arranged system of banking activity.
V.V. Maslennikov determines the banking system as a complex system which
is a system of slips, well organized and historically formed under the
influence of external and internal processes; the integrated net of institutions carrying out banking
activities [5].
O.V. Dzyublyuk defines the banking system as the aggregate of all banks
in the country that interact with each other, being a subject of the
established rules and bank regulations in order to provide opportunities for
effective monetary economic control, credit and settlement services for an
appropriate economic turnover, and the sustainability of banks [6].
Thus, all the above mentioned gives us a background to say that the banking
system is a mechanism that interacts with other system financial market
structures, and as well as its subsystem it forms a more general entity - the
economic system as a whole. The common features of the banking system are the
following:
- combination of many similar
elements. These elements are directed to the same goals. In the banking
system the abovementioned elements are separate banks, the main purpose of each
of them, except NBU is profit;
- dynamic system. The banking
system is constantly evolving, adapting to changes in the economic situation in
Ukraine, improving according to the new market requirements, including changes
in the methods and tools of banking,
expanding the range of banking operations;
- closed system. The
banking system is a system of closed type, concentrated mainly on specific
activities associated with the monetary sector, especially banks performing
banking transactions. A significant amount of banking information under the national
law is bank secrecy and cannot be disclosed or transferred to other systems;
-self-regulation system. The
banking system is able to regulate itself, so in case of bankruptcy of a bank
other banks occupy the niche. If economic situation in the country changes,
banks change their working methods immediately.
The main reasons that require a reform of the banking system are the
following:
- extreme complexity of the mechanism of the international banking
systems and use of substantial list of new financial instruments;
- cyclical development of the economy, which increases systemic risk
impact on the process of its movement from the banking sector to the capital market and the market of
derivative financial instruments;
- the need to improve disclosure and transparency through the use of macro
prudential indicators;
- the need to improve management of banking activities based on an appropriate
harmonization of national and international regulatory systems;
- the need to introduce equal
standards in the bank management, to ensure technical compatibility of
infrastructure, transparency of pricing for the similar banking and financial
services and others.
The National Bank of Ukraine is aimed at building a stable banking
system, which can operate as an engine of the economic growth. For that reason,
the National Bank of Ukraine should implement the following objective reforms
of the banking system:
- to increase the role of banks as financial intermediaries and ensure
the financial stability of the banking sector, including strengthening the
protection of rights of consumers, lenders and users of banking services;
- to enhance the role of the banking system in mobilizing savings to
promote the medium term and long term macroeconomic stability;
- to guarantee further development of the institutional capacity of the
National Bank in order to reduce macroeconomic shocks for the economy, to improve
manageability of the banking system development, to strengthen supervision and
development of progressive legislation;
- to establish a background for the development of diversified financial
system and improvement of the institutional and financial infrastructure in
accordance with the best practices of the European Union.
The reform of the banking system will lead to:
the issue of asset quality and capitalization of the banking system; the
stimulation of structural changes in the banking system; the renovation of the
structural imbalances in the balance sheet in order to stimulate sustainable
development of the banking system; the development of corporate governance in
banks; the development of financial markets and banking infrastructure; the institutional
transformation of the National Bank of Ukraine.
References:
1.
Банківська система України: монографія / В.В. Коваленко, О.Г. Коренєва,
К.Ф. Черкашина, О.В. Крухмаль. – Суми: ДВНЗ «УАБС НБУ», 2010. – 187 с.
2.
Банківська енциклопедія / ред. А.М. Мороза. – К. Ельтон, 1993. – 328 с.
3. Про банки і банківську діяльність [Електронний ресурс] : закон України,
прийнятий Верховною Радою України від 07.12.2000 № 2121-III. – Режим доступу:
http://zakon4.rada.gov.ua/laws. – Назва з домашньої сторінки Інтернету.
4.
Єпіфанов А.О. Операції комерційних банків навч. посібник. / А.О. Єпіфанов,
Н.Г. Маслак, І.В. Сало. – Суми Університетська книга, 2007.– 503с.
5.
Маслєнніков В.В. Національні банківські системи / В.В. Маслєнніков,
Ю.А. Соколов // банки та банківські системи. – 2006. - №3. – С. 4-16.
6.
Дзюблюк О.В. Проблеми забезпечення ефективного функціонування банківської
системи в перехідній економіці / О.В. Дзюблюк // Вісник Національного банку
України. – 2005. - №3. С. 30-45.