THE BANKING SYSTEM
Rise and development of the banking system of Ukraine
The rise and development of Ukraine. similar to that of the other countries arising on the ruins of the USSR, 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 effect 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 (practically the core of this system -- stable and actively functioning structure of commercial banks).
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. However, contrary to 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.
On 20 March 1991, the resolution of the Verkhovna Rada of the Ukrainian SSR was adopted entitled .On Procedure of Enactment of the Law of Ukrainian SSR "On Banks and Banking Activity"., pursuant to which this Law took effect on 1 May 1991.
Said resolution declared ownership by Ukrainian SSR of the Ukrainian Republican Bank of the State Bank of the USSR, the Ukrainian Republican Bank (affiliate) of the State Commercial Industrial-constructional Bank .UkrPromBudBank., the Ukrainian Republican Bank of the Savings bank of the USSR, and the Ukrainian Republican Bank of the ForeignEconomBank of the USSR together with their network, computing centers, all assets, liabilities, as well as the Ukrainian Republican Department of Encashment of the State Bank of the USSR with the network of establishments and organizations subordinated to it.
The National Bank of Ukraine was resolved to be created on the basis of the Ukrainian Republican Bank of the State Bank of the USSR.
Article 7 of Resolution of the National Bank of Ukraine directed to establish no later than 1 November 1991 a procedure for issuing licenses to banker's establishments authorizing to fulfill transactions in foreign currency within the Ukrainian SSR and abroad and to reconsider all the issued licenses authorizing the fulfillment of these transactions, as well as to implement re-registration of all the banks, their affiliates, and other credit establishments located on the territory of Ukraine.
On 7 October 1991, the Statute of the National Bank of Ukraine (NBU) was approved by a resolution of the Presidium of the Verkhovna Rada of Ukraine. The NBU was acknowledged as a state establishment accountable to the Verkhovna Rada of Ukraine.
The administrative body of the National Bank is the Board, which
In terms of its functions, the National Bank of Ukraine is the central bank, which pursues comprehensive state policy in the domain of monetary circulation, crediting and provision of the stability of the national monetary unit. It is, at the same time, the money issuer, the body of currency regulation, the body of bank supervision, is the bank of banks, the state bank, and the organizer of inter-bank settlements.
Being the central bank of the state, the NBU pursues monetary-credit policy, establishing and applying appropriate instruments. The National Bank keeps the national book of registration of banks, currency exchanges, and other financial-credit establishments. It represents the interests of Ukraine in relations with the central banks of other countries, international banks, and financial-credit organizations.
The National Bank of Ukraine enjoys the monopolistic right to issue money into circulation, as well as to issue national monetary marks (bank-notes, coins). Since 1992, the NBU has put into operation a money manufacturer in Luhansk. a bank-note factory in Kyiv. a manufacturer of bank-note paper in Malin. The Mint and the Central Depository have been built in Kyiv.
The provision of the economy with cash money is carried out through the network of regional departments of the National Bank in fulfillment of the orders of commercial banks.
It should be noted that prior to the establishment of the NBU, when only the republican division of the State Bank of the USSR was in operation in Ukraine, Ukraine had neither methodology. mechanisms and instruments to regulate the monetary-credit market, nor practical experience of applying them.
The National Bank of Ukraine is the basic body, which defines currency policy and implements it on the principles of general economic policy of Ukraine. Together with the Cabinet of Ministers, the NBU draws up the balance of payments of Ukraine; supervises the observance of the limit of foreign debt as affirmed by the Verkhovna Rada; defines the limits of foreign-currency denominated indebtedness of authorized banks due to non-residents; accumulates, preserves, and uses the reserves of currency values for the realization of the state's currency policy; issues licenses authorizing the fulfillment of currency transactions and decides about their abrogation; defines ways to establishing and using currency exchange rates of foreign pegged currencies nominated in the currency of Ukraine; and sets the rates of currency values nominated either in foreign currency or settlement (clearing) units.
Apart from these regulatory functions in the domain of currency policy, the NBU also fulfills controlling functions. Namely, it supervises the observance of the rules for currency transactions on the territory of Ukraine and ensures the fulfillment by the authorized banks of functions concerning the implementation of currency control.
The National Bank of Ukraine implements bank supervision over the observance by commercial banks of the banking legislation, the observance of economic norms set by the NBU and its own regulatory acts.
The National Bank of Ukraine is the bank of banks. With the view of maintaining the stability of the banking system and extension of its credit opportunities, it provides credits to commercial banks. These credits provide for the interim needs of banks and for crediting of special programs related to the reorganization and modernization of manufacturing, the development of particular sectors of the national economy, and the restructuring of the economy of Ukraine.
Short-term credits to commercial banks are provided through credit auctions. Also, collateral credit is put into practice.
As the state bank, the NBU arranges and implements through the banking system the cash servicing of the state budget of Ukraine. It is entrusted with the fulfillment of transactions with government securities. In 1993, the new mechanism of the cash servicing of the state budget was put into practice in Ukraine, which excludes the "automatic" crediting of state expenditures. Funding on account of the budget is carried out within the limits of available funds. In accordance with a decision of the Verkhovna Rada of Ukraine, the National Bank may provide credits to the central government without special preferences.
As per the Law "On Banks and Banking Acidity., the National Bank is not allowed to fund deficit of the state budget.
As the organizer of inter-bank settlements, since January 1994 the NBU has put into practice the automated system of inter-bank settlements with the utilization of advanced technologies. The system is a set of software and hardware means, which ensures interchange with electronic documents, their cross check, analysis and protection from illegal interference.
To ensure the functioning of this system, regional
clearing chambers have been created in the Crimea and every oblast
that are united into the all-country network of clearing chambers
of Ukraine, with the Central Clearing Chamber in the city of Kyiv
at the top.
The role of leading bankers in the rise and development of the NBU
The adoption of the Law "On Banks and Banking Activity" and the ratification of the Statute of National bank were followed by hard work aimed at putting the intentions set by this Law into practice.
It was necessary, , to create the central bank of the country -- the National bank -- virtually "from scratch" to help Ukraine to gain credibility in the world. Lacking was appropriate personnel, due laws, methodology, equipment, and funds. There was only one thing -- the title of "The National Bank of Ukraine." And the first person, who had to head this new financial government agency was a well-known banker, Volodymyr Matvienko. In a short period of time (August 1991 - March 1992), when he was the Governor of the NBU Board, Mr. Matvienko managed to do quite a lot. In December 1991, the Verkhovna Rada passed a resolution about the ratification of the name and characteristic attributes of the monetary unit of Ukraine - the hryvnia. Between August and March of 1991 eighty two commercial banks were re-registered. At the beginning of 1992 the first Ukrainian bank with foreign interest was registered in Donetsk oblast. and by the beginning of February twenty two commercial banks already had been opened, direct correspondent relations were arranged with many foreign banks, and the NBU's computer center was created with the view of providing inter-bank settlements.
The second Governor of the NBU Board (March - November 1992) was another well-known banker, Vadym Hetman.
The first thing that Mr. Hetman did was to initiate mass computerization of the Central Bank. Also, he created organizational grounds for the establishment of the system of inter-bank electronic settlements. Under his leadership a completely an absolutely new department began to work in the National Bank - the department of balance of payments.
In June 1992, the formation of the Stabilization Fund for Ukrainian National Currency began. In July 1992, a single settlement-cash center of the NBU was created with the transition to settlements with the CIS member states via correspondent accounts opened by the NBU. In August 1992, the Currency Exchange of the NBU was created. In September 1992, Ukraine joined the International Monetary Fund and The World Bank, and in October of the same year she joined the European Bank for Reconstruction and Development. In November 1992, Ukraine left the "ruble zone".
Mr. Hetman made a considerable effort to foster the elaboration and adoption of the Law of Ukraine .On Banks and Banking Activity., together with the first President of the Association of Ukrainian Banks Mr. Markov. then a People's Deputy of Ukraine.
Ukraine was apparently lucky in that from the beginning and until now the central bank of the country has been headed by professionals. Victor Yuschenko, who was elected to the post of the NBU Governor after the retirement of Mr. Hetman, continued and developed the cause of his predecessors. He has had to bear a heavy cross -- in the period of transition from an administratively-command to the market-oriented economy he had to define monetary policy of Ukraine, create new instruments of the monetary market, conduct experiments, and advocate rigid monetary decisions in the Parliament.
In February 1997, Mr. Yuschenko was approved by the
Verkhovna Rada of Ukraine to the post of the NBU Governor for
the second time, for another four years. He continues his responsible
cause. Everything. which is described below, directly concerns
his personal participation in the improvement of banking and the
banking system in Ukraine.
4. The National Bank: effect on the progress of the banking system
The last four years had been the years of formation and further development of the national banking system. The first level of this system - the NBU - has been described above. The system of commercial banks - the second level of the banking system - also has traveled a fatiguing path towards its creation in the conditions of a radical breakdown of economic relations. And, if the majority of commercial banks managed to survive in this difficult period and be focused on the market for banker's services, this mostly happened due to the experience of the management of the banks, control and governance on behalf of the National Bank of Ukraine, and the advocacy of banks' interests by the Association of Ukrainian Banks (AUB) created in 1990.
The central bank implemented sequential control over the formation of the statutory capitals of the banks. The system of application of economic standards concerning banker's activities was upgraded for the sake of surety and the interests of depositors and creditors. First and foremost, the standards of solvency, liquidity, and the maximum size of credit per loan debtor were put into practice, which helped prevent the crash of many banks.
In order to enhance the responsibility of banks for the fulfillment of banker's transactions, also improve the quality of servicing the clients, the system of licensing of commercial banks' activities was introduced at the end of 1996. As an important tool of influence for the NBU on the activities of commercial banks, the mechanism of mandatory reserves was used.
a) Credit-and-monetary policy and monetary reform
The National Bank of Ukraine consistently has pursued a reasonable credit and monetary policy. Using the mechanism of monetary leverage, the control over the condition of money supply in circulation was implemented. This made it possible, on a regular basis, to lower the NBU discount rate, to secure stability of the currency, and eventually, to implement monetary reform successfully and introduce the national currency - the hryvnia.
By the efforts of the NBU's specialists and services, the preparatory for monetary reform was carried out and the manufacture of the sufficient supply of new bank-notes and coins was arranged. It was ensured that bank-notes and coins were delivered promptly to all the regions of the country. The needed instruction documents were developed for all the agencies that fulfilled the interchange of money. The decisive role for reform. the term of issuance of the hryvnia, the rate of exchange of old money to new, the definition of the mechanism for issuance of the hryvnia, and the formation of the denomination structure of the supply of the new money -- all were spelled out by the NBU's management.
Monetary reform in Ukraine, in a wide interpretation, pursued at least three aims: to create the national monetary system of the independent Ukrainian state; to ensure the constancy of the national money on the level which is appropriate to stimulate the economic and social development of the country with the aid of monetary instruments; to ensure the functioning of the new monetary system pursuant to requirements of the rules of market-oriented economy.
The volume of cash in circulation not only has not increased during the period of reform, it decreased by nearly 150 mln UAH.
Due to an increased number of time deposits of business entities and the public, the liquidity of commercial banks increased by about 150 mln UAH and had amounted to 500-600 mln UAH by late October 1996. This contributed to the growth of volumes of credits provided to business entities by commercial banks. A trend in the growth of the volumes of long-term crediting appeared.
The structure of money supply improved. The reform facilitated more active receipt of payments paid by the population for communal and other services, and increased volume of the selling of goods.
After the monetary reform, the NBU sharply faced a new challenge. It had to secure stability of the national currency. It is difficult to over-estimate the importance of the role of financial stabilization. The advantages of this stabilization include the imposition of market guidelines, regulators, market stimuli for business entities, the creation of new economic medium, and a sound basis for a new economic system.
Steps taken on this path are as follows:
Since 1993, the National Bank of Ukraine has begun to develop Principal Guidelines of Monetary-Credit Policy. Guidelines provided by this regulatory act are aimed at scotching inflation, provision of the stability of the national currency, and increasing the effectiveness of the operation of both the economy of the country on the whole, and the banking system especially.
During the time of its activity, the NBU has developed a number of instruments for regulation of the monetary-credit market. It set up the procedure for formation of mandatory reserves by commercial banks, appropriate mechanisms for the issuance and withdrawal of credit funds, defined the rules for the fulfillment of open-market operations, such as credit auctions, collateral crediting, and transactions on the share market.
Since 1994, with a view toward providing the equitable access to NBU's credits for all commercial banks, the National Bank renounced direct crediting of banks against production-related targeted programs and put credit auctions into practice. In order to support the short-term liquidity of commercial banks, the NBU instituted lombard crediting - crediting on the security of highly liquid securities.
One mechanism for the regulation of the monetary-credit
market, which the National Bank applies is the discount rate on
credits, the size of which is defined depending on the level of
inflation, demand and supply for credits at auctions and the inter-bank
market. During the last several years, the National Bank has undertaken
appropriate measures for the gradual decline of the discount rate,
which basically was positive. i.e., was higher than the level
of inflation. This policy of the NBU, aimed at supporting of the
stability of the national currency, encouraged corporations and
the public to allocation temporarily free funds in the establishments
of banks, and lessened the outflow of funds to the currency market.
b) Currency regulation
At the beginning of the NBU's activity, the currency market concentrated on lots of problems related to the general standing of the economy of the country. The slow pace of restructuring, faulty legal framework for advocacy of businesspeople's rights, augmentation of processes causing inflation in the economy resulted in an increased demand for currency values.
The fixation of the exchange rate in Ukraine that lasted from August 1993 to October 1994 exacerbated the negative condition peculiar to the crisis in the country's economy such as reduced exportation of products paid for in foreign currency and the volumes of outputs of import-dependent enterprises, decreased receipts of hard currency on the internal currency market of Ukraine, and increased outflow of capital abroad.
Pursuant to the program of economic reforms, steps were needed to provide gradual liberalization and decentralization of the currency market.
Since October 1994, the official exchange rate of Ukrainian karbovanets, which hitherto had been imposed administratively, began to be defined by way of bidding on the Ukrainian Inter-bank Currency Exchange (UICE). The number and volumes of sales on the UICE increased gradually.
Since June 1995, the currency exchange has initiated daily sales of US dollars and Russian rubles, and since December of the same year - German marks. Also, traded are Byelorussian rubles, French francs, Italian liras, English pounds sterling.
For the expansion of the currency exchange network, affiliates of the UICE were opened in Kharkiv, Dnipropetrovsk, Donetsk, and Lviv. The Crimean inter-bank currency exchange also has been put into operation.
Since spring 1995, authorized banks have been given the right to carry out in the inter-bank currency market of Ukraine transactions of buying and selling US dollars, German marks, Russian and Byelorussian rubles, which are subject to free sale. And since May 1995 it has permitted to implement mandatory sales of currency receipts and spare currency funds of Ukrainian residents both through the UICE and directly via authorized banks on the inter-bank currency market.
With the goal to increase the demand for the national currency and stabilize the exchange rate, the National Bank of Ukraine undertook the following steps to strengthen the priority of the national monetary unit as a single payment means in Ukraine:
An important step on the route of settling the national
monetary unit and its acknowledgment in the world is Ukraine's
agreeing, in May of 1997, to Article VIII of the Statutes of the
International Monetary Fund. This also means international acknowledgment
of the hryvnia as a convertible monetary unit in current transactions.
c) The National Bank on the securities market
The NBU played a key role in the mass-scale introduction of the market for national securities. In Ukraine, this market has been in operation since 10 March 1995 in the form of bonds government internal loan, which are issued in the coupon and discount forms in the system of electronic circulation of securities developed and put into practice by the NBU. The function of the issuer of bonds by proxy of the Government is fulfilled by the Ministry of Finance of Ukraine, and the National Bank plays the role of the general agent for placement, payment of interest and repayment of these government promissory notes. The volume of sales of the bonds of internal government loan in 1995 totaled 304 mln UAH. In 1996 is was as large as 3,063 million UAH; that is, this volume increased more than 10 times.
The secondary market for government securities (GS) also is developing. Today, it is open for operations of exchange-market and over-the-counter trade. collateral crediting. and REPO transactions such as crediting on the security of GS on conditions of buy-back.
The creation of the market for government securities is one of the central links in the reforming of Ukraine's economy. The main tasks of this market are as follows:
This new segment on the share market of Ukraine wins
confidence not only of institutional investors, but also the public.
And the authority of the general agent - the National Bank of
Ukraine - appears to contribute to this.
d) Improvement of the system of inter-bank settlements
One essential function of the National Bank is the provision of normal settlements in the national economy. It is known that due to the earlier existing system of settlements which included payment requisitions and the system of collection of payments, significant amounts of debtor-creditor indebtedness had been created in the national economy. Settlements used to take 20-30 days on average.
Therefore, the new procedure of inter-bank settlements, which was originated by the Concept of Electronic Monetary Circulation in Ukraine (developed in late 1992), played an important role in the reforming of payment technologies in the banking system. Now this idea has already been put into life -- the national payment system has been created. Gradual steps -- from the imposition of the new procedure for inter-bank settlements via correspondent accounts of commercial banks. to the establishment (in June of 1993) of the Central Clearing Chamber, the Center for Interstate Settlements and the National Payment Council -- brought us nearer to the main goal -- the imposition of the System of Electronic Payments (SEP) -- in January 1994.
This offered the opportunity to reach world class quality of processing of information in the field of inter-bank settlements. to considerably upgrade security. to restrict the risk of circulation of fraudulent money and to minimize the term of the passage of payments. The SEP excludes the necessity of paper technology and allows settlements to be conducted in a few hours both between several banks and in the national economy on the whole. The reduction of the term of the passage of payments presented the opportunity to decrease the volume of cash in turnover. enabled banks to more efficiently use their resources, clients and funds. and provided the National Bank of Ukraine with an instrument to control and regulate monetary circulation. Information. which passes via the SEP. is securely defended against non-permitted interference. possesses a multi-level protection. that is being continuously improved and developing. Today, one may state that in terms of protection, our system is the best among similar systems operated in the CIS member states. and the uniqueness of its software puts it into one of first places in Europe.
The automation of the market for bonds of internal government loan also improved inter-bank settlements.
With the goal to reduce cash circulation of the national currency the National Bank, together with commercial banks, made a decision about putting plastic cards into the practice for non-cash settlements of physical persons. Specialists of UKRKART LLC and the NBU developed the design of the National System of Settlements based on international experience.
The existing system of inter-bank settlements currently satisfies the needs of Ukraine's economy. But with allowance for the perspectives of the revival of economic activity in the country and the increasing requirements of participants of settlements to the levels of safety and quality of servicing, the necessity arose to create a generation of payment systems on the basis of the new conceptual. technological. technical and software. The National Bank of Ukraine develops the next generation design of such a system.
The year 1998 is a year of the transition of Ukraine's
banks to the system of international accounting standards (IAS).
Transition to the new system of accounting will allow Ukrainian
banks to communicate with western financial circles. to shift
from the existing accounting .for needs of taxation. to accounting
.for need of the manager., where priority is given to administration
of a bank as an integrated system.
e) Legislative and regulatory activity
In 1991, the National Bank of Ukraine began its operation. actually with the status of a Ukrainian affiliate of the State Bank of the USSR.
To build the banking system of sovereign Ukraine. it was necessary to create own legislative and regulatory framework for banking activity .from ground zero..
The Law "On Banks and Banking Activity" adopted by the Verkhovna Rada of Ukraine in March 1991 became a foundation, on which the national banking system began to be created. This Law withstood the test of time.
The banking system headed by the NBU in cooperation with other banks and the Association of Ukrainian Banks actively develops instructions, regulations, directions, and other documents of a regulatory character, thereby filling in the gaps in legal framework. During Ukraine's independence, nearly 500 short-term and long-term documents of a regulatory character have been adopted; out of this number, more than 200 are still effective now.
Currently, the draft laws of Ukraine .On the National Bank of Ukraine., .On Credit., .On Banks and Banking Activity., .On Currency Regulation., .On the Insurance of Deposits of the Population., and others have been prepared.
Relations of strategic partnership for regulatory
and legislative activity in the field have been set and are now
in progress between banks. the Association of Ukrainian Banks,
and the NBU.
As of 1 January 1998, 227 banks were registered in
the National Book for Registration of Banks, Currency Exchanges
and Other Financial-credit Establishments, including two state-owned
(Oshchadbank of Ukraine and Ukreximbank) and 17 banks with the
involvement of foreign capital (as of 1 October 1997). Within
1992-1998, 42 commercial banks were excluded from this book. Currently,
186 banks operate in Ukraine.
Table 5.1.Quantitative Indices of the Development of the Banking System of Ukraine
| 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | |
| 1. Number of registered banks. total | 130 | 207 | 228 | 230 | 229 | 227 |
| Including AUB member banks | 49 | 74 | 97 | 114 | 120 | 128 |
| 2. Payroll (thousand employees) | 106.1 | 123.7 | 154.6 | 151.3 | 152.3 | - - |
| 3. Paid statutory capital of acting | ||||||
| commercial banks (mln UAH) | 0.5 | 15.0 | 87.8 | 540.95 | 1053 | 1566 |
| 4. Equity of banks (mln UAH) | 2.0 | 75.0 | 435.8 | 1854 | 3606 | 5096 |
(billion UAH) | annum (%) | |
| Currency of Balance | ||
| Paid statutory capital | ||
| Funds on current accounts of clients | ||
| Deposits of legal persons | ||
| Private deposits | ||
| Credits granted | ||
| Reserves to cover credit risks | ||
| Investments in securities | ||
| Balance profit |
Also, much effort is being made to increase the number and upgrade the quality of banker's services as the Ukrainian financial market develops. In a highly competitive fight for profitable clients, banks are simply forced to do so.
Currently, commercial banks of Ukraine fulfill the cash servicing of legal persons, exchange business, servicing of traveler's cheques, transactions with T-bills, service the accounts of physical persons, and service of plastic cards.
Ukrainian banks take part in different international programs to support private entrepreneurship in Ukraine, such as EBRD credit lines, German-Ukrainian fund, etc.
As the share market develops, and more specifically the T-bill market, new services come into being, including the brokerage servicing of clients, and management of T-bill portfolios. There is a new task ahead -- to work with municipal securities.
Credit activity of banks becomes more active. In addition to short-term credits, the volume of long-term credits is increasing. There is a tendency toward the decline of all kinds of interest rates on credits granted to direct loan debtors. A positive trend is observed concerning the improvement of the credit portfolios of banks. Confidence of the public with respect to commercial banks grows; the volumes of the deposits of the population with banks rose 380 times between 1992 and 1996.
In the terms of crisis phenomena in the economy of the country, just traditional credit transactions of banks 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.
In 1990, the first 9 commercial banks united for the advocacy of their interests into the Association of Ukrainian Banks. which now unites 124 banks and four regional bank unions.
During the period of its activity, the AUB became established as an efficient and influential organization that contributed to the progress and stabilization of the banking system.
The AUB considers participation in the legislative process one of most essential directions of its activity. The Association was an active contributor of the elaboration of the Law of Ukraine .On Banks and Banking Activity.. Tax legislation was and still is in the focus of the AUB's attention. The AUB, together with the NBU, achieved parity between banks and other business entities in taxation.
The AUB took active part in the preparation of the Law of Ukraine .On Amendments to the Law of Ukraine "On Taxation of Profits of Enterprises".. The Association managed to ensure sane conditions in the creation by banks in terms of reserves for the coverage of risks. and improving other laws and regulatory acts.
It is necessary to mention that the sound activity of commercial banks, to a considerable extent, depends on the quality of preparation of the NBU's decisions, and substantiation of these decisions. Therefore, much importance is attached to the collaboration between AUB and NBU as regards the creation of the sane legal background for banking activity. At AUB's request the National Bank issued directions, pursuant to which the regulatory acts of the NBU must be submitted to the National Bank Board after their treatment with the participation of banks and the Association of Ukrainian Banks. For the preparation of several the most essential draft documents, working groups with the participation of specialists from AUB were created with the NBU. Such procedure was applied. e.g.. when polishing up fundamental documents that regulate the activity of commercial banks such as Instruction .On the Procedure for Regulation and Analysis of the Activity of Commercial Banks., the Provisions .On Mandatory Reserves in the Banking System," and other documents.
Now the Association takes direct part in the important work dealing with the transition of the banking system of Ukraine to the system of international accounting standards and reporting.
One direction of the AUB's activity is establishing and maintaining business-like relations with the President of Ukraine. the leadership of the permanent Committees of the Verkhovna Rada of Ukraine, Prime Minister, and other officials from government authorities.
The Association coordinates its work with other unions and professional participants of the market.
For Ukraine to have a well prepared banking system capable of attacking new challenges dealing with restructuring of the economy, the economic policy should:
Without banks that are economically powerful, that
can operate in a stable manner, are aware of their mission in
the market-oriented economy, and that have credibility in society
- without such banks market-oriented reform in Ukraine will not
be able to provide those beneficial impacts which are awaited
by the public.
Table 5.3. Major indices of performance of commercial banks of Kyiv as of 1 Jan 1998
balance (mln UAH) | (mln UAH) | fund (mln UAH) | deposits (mln UAH) | (mln UAH) | of statutory fund (%) | of net assets (%) | ||
| UKRAINA | 2211,49 | 3838,49 | 647,28 | 55,72 | 165,077 | 74,477 | 133,65 | 3,37 |
| OSCHADBANK | 1230,04 | 1911,12 | 238,22 | 10,49 | 732,857 | 52,828 | 503,48 | 4,29 |
| UKRSOTSBANK | 1203,06 | 1816,62 | 344,31 | 29,23 | 55,612 | 90,075 | 308,19 | 7,49 |
| AVAL | 1004,51 | 1391,59 | 119,46 | 34,67 | 19,233 | 65,450 | 188,76 | 6,52 |
| UKRINBANK | 241,42 | 299,76 | 50,68 | 15,21 | 16,464 | 5,144 | 33,83 | 2,13 |
| CREDIT LYONNAIS UKRAINA | 193,18 | 283,88 | 27,73 | 22,26 | 0,000 | 12,154 | 62,94 | 7,25 |
| NADRA | 176,99 | 224,33 | 26,94 | 16,31 | 7,750 | 4,418 | 27,09 | 2,50 |
| UKRAINIAN CREDIT BANK | 163,78 | 220,40 | 29,91 | 6,88 | 4,501 | 31,433 | 456,67 | 19,19 |
| PRAVEX-BANK | 140,96 | 194,89 | 35,30 | 24,58 | 10,913 | 4,596 | 18,70 | 3,26 |
| VA-BANK | 132,68 | 197,24 | 30,98 | 11,26 | 4,689 | 12,135 | 107,80 | 9,15 |
| ZEVS | 97,42 | 129,91 | 30,21 | 17,60 | 6,860 | 15,180 | 86,24 | 15,58 |
| KYIV | 83,80 | 98,30 | 18,59 | 11,80 | 7,262 | 5,135 | 43,53 | 6,13 |
| FINANSY I CREDIT | 82,05 | 93,68 | 24,57 | 20,00 | 0,485 | 3,278 | 16,39 | 4,00 |
| PERCOMBANK | 81,08 | 86,59 | 23,09 | 7,50 | 6,639 | 3,945 | 52,60 | 4,87 |
| SOCIETE GENERALE UKRAINA | 80,09 | 117,83 | 26,17 | 23,31 | 0,000 | 10,829 | 46,45 | 13,52 |
| ENERGOBANK | 73,82 | 100,89 | 25,67 | 10,15 | 7,805 | 7,353 | 72,43 | 9,96 |
| BANKIRSKY DIM | 69,30 | 85,67 | 17,93 | 8,26 | 0,141 | 0,459 | 5,55 | 0,66 |
| AGIO | 64,58 | 81,43 | 28,57 | 6,71 | 3,793 | 8,587 | 127,93 | 13,30 |
| MRIYA | 53,09 | 57,70 | 9,53 | 5,13 | 4,270 | 3,113 | 60,68 | 5,86 |
| UKRNAFTOGAZBANK | 43,22 | 60,29 | 28,17 | 20,25 | 0,294 | 3,874 | 19,13 | 8,96 |
| ETALON* | 41,00 | 46,96 | 7,91 | 3,40 | 0,568 | 4,752 | 139,77 | 11,59 |
| OLBANK | 39,46 | 46,42 | 18,16 | 7,78 | 1,464 | 4,321 | 55,51 | 10,95 |
| ROSTOK-BANK | 33,04 | 37,82 | 9,52 | 6,89 | 3,262 | 3,425 | 49,68 | 10,37 |
| LEGBANK | 31,76 | 42,81 | 6,60 | 3,18 | 1,079 | 2,014 | 63,41 | 6,34 |
| GEOSANTRIS | 31,72 | 32,48 | 13,20 | 6,03 | 0,316 | 0,158 | 2,62 | 0,50 |
| TRANSBANK | 30,19 | 45,57 | 14,71 | 7,00 | 1,117 | 7,034 | 100,49 | 23,30 |
| INTEGRAL | 25,40 | 31,58 | 8,44 | 6,43 | 0,413 | 1,877 | 29,20 | 7,39 |
| INTERBANK | 24,57 | 27,96 | 7,84 | 4,67 | 0,163 | 1,754 | 37,59 | 7,14 |
| KYIV RUS BANK* | 22,52 | 24,11 | 5,47 | 3,72 | 0,835 | 1,481 | 39,82 | 6,58 |
| ALLONGE* | 20,81 | 22,00 | 15,89 | 15,00 | 0,000 | 1,191 | 7,94 | 5,72 |
| SYNDICATE | 19,62 | 22,73 | 3,97 | 3,25 | 0,000 | 2,390 | 73,54 | 12,18 |
| AVIATECHBANK* | 18,43 | 19,35 | 8,49 | 6,78 | 0,000 | 0,707 | 10,44 | 3,84 |
| ANTHARES | 18,28 | 20,29 | 4,02 | 3,31 | 0,027 | 0,869 | 26,23 | 4,76 |
| ARKADA | 18,06 | 20,59 | 12,26 | 8,06 | 3,876 | 1,896 | 23,53 | 10,50 |
| SLAVUTYCH | 15,76 | 18,38 | 8,23 | 4,46 | 1,061 | 2,070 | 46,39 | 13,13 |
| AVTORYTET | 12,19 | 13,35 | 8,40 | 6,59 | 0,354 | 0,612 | 9,28 | 5,02 |
| ZHODA | 11,64 | 13,08 | 3,77 | 2,62 | 0,216 | 1,255 | 47,89 | 10,78 |
| NARODNY BANK | 10,84 | 13,37 | 5,09 | 2,30 | 0,029 | 0,012 | 0,51 | 0,11 |
| SYNTHESIS | 8,38 | 10,07 | 5,34 | 4,73 | 0,000 | 1,030 | 21,79 | 12,28 |
| UKRKHARCHOPROMBANK | 7,98 | 8,92 | 3,57 | 2,96 | 0,458 | 0,250 | 8,44 | 3,13 |
* Ukrainian Banks Association non-member
banks