THE FINANCIAL AND BANKING SYSTEM OF UKRAINE
HISTORY The rise and development of Ukraine's banking system has proceeded in extremely adverse conditions. The most important of these include: ü the destruction of resources with respect to Ukrainian banks as part of a central Russia-based system in 1990 -1991; ü the economic crisis‚ which manifested itself in the massive‚ powerful depression of production; ü the decline of gross domestic product, the keen decrease in the citizens' incomes; ü 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.
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. Prior to the collapse of the USSR, the National Bank of Ukraine was a branch of the Central Bank of the USSR. Officially, the National Bank of Ukraine acted as the Central Bank of Ukraine since early 1992. Like institutions of many newly independent nations, it faced dire financial straits during the 1990 s, leading to a prolonged period of hyperinflation.
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 «Ukr. Prom. Bud. Bank» , the Ukrainian Republican Bank of the Savings bank of the USSR, and the Ukrainian Republican Bank of the Foreign. Econom. Bank 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. 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
STRUCTURE OF THE BANKING SYSTEM OF UKRAINE The Ukrainian banking system is a two-tier structure consisting of the National Bank of Ukraine; commercial banks of various types and forms of ownership including the state-owned Export. Import Bank and a specialized commercial Savings Bank.
BANKING SYSTEM OF UKRAINE The National Bank of Ukraine serves as the country's central bank which pursues a uniform state monetary policy to ensure the national currency stability. The range of commercial banks activities It coordinates, supervises and regulates a functioning of the banking includes: system in general and determines exchange rate of the national currency ü receiving deposits of enterprizes, institutions and households, ü crediting of economic entities and households, ü investments in securities, ü formation of cash balance and reserves, as well as other assets, ü cash and settlement servicing of the economy, ü foreign exchange operations ü other services to natural persons and legal bodies. Commercial banks are formed as jointstock companies or as companies on an equal footing with both legal and natural persons involved.
BANKS ARE GOVERNED BY: The Constitution of Ukraine Laws of Ukraine - “On the National Bank of Ukraine” and “On Banks and Banking” The legislation All other regulations and Statutes issued by the National Bank of Ukraine
COMMERCIAL BANKS: BANKS As of 2009 Ukraine has 198 registered banks. Breakdown of the bank are as follows: 184 are operating banks. 5 are excluded from the State Bank Register. 12 are under liquidation. 51 have participation of foreign capital. 17 have 100% foreign capital.
GOALS OF BANKING SYSTEM The banking system is a specific economic and organizational framework that ensures the functioning of money market and the economy at the whole.
THE MAIN GOALS OF THE BANKING SYSTEM OF UKRAINE ARE: transformational; creating means of payment and controlling money supply; maintenance of banking operations and money market. to provide public control and regulation of banking activity in order to reconcile the interests of separate banks with the interests of society. to ensure security and stability of separate banks and the whole system
NATIONAL BANK OF UKRAINE 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. National Bank of Ukraine acts as the Central Bank of Ukraine since early 1992.
NATIONAL BANK OF UKRAINE. LEGAL AND ECONOMIC STATUS. The National Bank of Ukraine is a legal entity with separated property, which is the object of the state property. The authorized capital amounts to UAH 10 million. It may be increased by a decision of the Council of the National Bank. The National Bank shall not be responsible for the liabilities of the government bodies; the government bodies shall not be responsible for the liabilities of the National Bank, except for their voluntary assumption of such an obligation. The National Bank may open its institutions, branches and representative offices in Ukraine, as well as representative offices abroad.
NATIONAL BANK OF UKRAINE. CORE PURPOSES. According to the Constitution of Ukraine, the core purpose of the National Bank is to ensure the stability of Ukraine's monetary unit. To carry out its major function, the National Bank shall foster the stability of the banking system and within its competence, the price stability. National Bank, within its power, promotes stability of the banking system on conditions that this does not prevent the achievement of goals. National Bank also contributes to the maintenance of stable rates of economic growth and supports the economic policy of the Cabinet of Ministers Ukraine, on conditions that this does not prevent achieving strategic objectives.
NATIONAL BANK OF UKRAINE. MAIN FUNCTIONS. to determine and pursue the monetary policy in accordance with the General Principles of the Monetary Policy developed by the Council of the National Bank of Ukraine; to issue the national currency of Ukraine on a monopoly basis and to organize its circulation; to act as the creditor of last resort for banks and to organize the refinancing system; to establish the rules of conducting banking transactions, accounting and reporting, protection of the information, funds and property for the banks; to organize and to provide the methodological support to the system of the monetary, crediting and banking statistical information and the statistics of the balance of payments; to determine the system, procedure and modes of payments, including those between banks;
NATIONAL BANK OF UKRAINE. MAIN FUNCTIONS. to exercise the banking regulation and supervision; to keep a Register of banks, to license banking business and transactions, if provided for by the laws; to represent Ukraine's interests in central banks of other states, international banks and other crediting institutions, where the cooperation takes place at the level of central banks; to exercise the currency regulation with the competence to be defined by a special law, to determine the procedure of effecting payments in the foreign currency, to organize and exercise the currency control over the commercial banks and other credit institutions which are in possession of a National Bank's license for the transactions with currency values; to ensure the accumulation and custody of the gold and currency reserves and the conduction of transactions with them and the banking metals;
THE ASSOCIATION OF UKRAINIAN BANKS 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.
THE ASSOCIATION OF UKRAINIAN BANKS The AUB became established as an efficient and influential organization that contributed to the progress and stabilization of the banking system.
ACTIVITIES OF THE ASSOCIATION OF UKRAINIAN BANKS 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. » 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» . Therefore, much importance is attached to the collaboration between AUB and NBU as regards the creation of the sane legal background for banking activity
ACTIVITIES OF THE ASSOCIATION OF UKRAINIAN BANKS 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.
History of commercial banks • • Before the proclamation of the independence of Ukraine, there were only five state banks. To the end of 1991 in the country were established 76 banking institutions. The number of commercial banks by the end of 1992 exceeded 90. In 1992 there were already 130, and in 1993 – 207. In the next three years, the number of banks has reached 230 and stabilized at this level. At the same time, three of five large state banks – “Promstroybank”, “Zhitlosotsbank”, “Agroprombank” – were transformed into joint stock companies – “Prominvestbank”, “Ukrsotsbank”, and the bank “Ukraine”.
Commercial banks today • • • As of January 1, 2010, 196 commercial banks were registered in Ukraine, of which 182 have licenses from the NBU to perform banking transactions, and 14 are in the process of liquidation. There are 15 commercial banks with mixed capital, among which 5 banks have 100% foreign capital, and registered as Ukrainian economic entities. These are “Credit Lyonnais” (French capital), “Societe Generale” (French capital), the Deposit-Credit Bank (Polish capital), ING Bank and Credit Suisse. In addition, at present in Ukraine there are 22 representative offices of foreign banks. Ukraine’s banking sector has a high level of concentration. According to NBU data, over 50% of the sector’s total assets are held by the 10 largest banks.
Commercial banks today ACCORDING TO THE RATING OF BANKS BY ASSETS AND LIABILITIES AT THE END OF 2009 THE BEST ARE:
COMMERCIAL BANK. PROBLEMS. The Ukrainian banking sector has historically suffered from a number of significant weaknesses, including undercapitalization, weak corporate governance and management, poor asset quality, and even excessive political intervention in some instances. The situation is improving and reforms are continuing. Today, Ukraine’s banks are required to prepare accounts based on International Financial Reporting Standards (IFRS). .
PENSION FUNDS • • Pension Fund of Ukraine is a central body of executive power, the activity of which is directed and coordinated by the Cabinet of Ministers of Ukraine through the Minister of Labor and Social Policy Pension Fund of Ukraine in its activity is guided by Constitution of Ukraine, the Law of Ukraine on Obligatory State Pension Insurance dated July 9, 2003 and other laws of Ukraine, by the President’s Decrees and Parliament’s regulations accepted according to Constitution and laws of Ukraine, by acts of the Cabinet of Ministers of Ukraine, other legal documents and by Regulations on Pension Fund of Ukraine approved by the President’s Decree dated March 1, 2001.
THE MAIN TASKS OF PENSION FUND participation in forming and realization of state policy in the sphere of provision of pensions and social security guidance and management of solidary system of obligatory state pension insurance appointment (re-calculation) of pensions, of monthly permanent supply for judges retired and preparation of documents for their payment effective and targeted usage of assets, improvement of methods of financial planning, of reporting and of control system over assets expenses
INVESTMENT FUNDS • In Ukraine, investment funds were first created in 1994. • Active development of investment funds in Ukraine only started in 2003 when the classic investment funds (in terms of their nature and functions) were created after the adoption of the Law of Ukraine On Collective Investment Institutions (Unit and Corporate Investment Funds) in 2001. The new law replaced the Decree of the President of Ukraine On Investment Funds and Investment Companies Number 55/94, dated February 19 1994. • Under the new rules, investment institutions established under the former rules may continue their operations for the term specified in their statutory documents. By the end of 2009 there were already 834 investment funds established according to the rules of the law. In Ukraine the minimal asset volume of the unit investment fund is 1, 250 times the minimum wage, which has been equal to Hrn 515 ($103).
INSURANCE COMPANIES • The insurance sector in Ukraine is developing in a positive way although has still low levels of investment and insurance in general is not very widespread in Ukraine, however, the fast growing of the Ukrainian economy is attracting much interest from overseas, especially from Europe, Russia and Western Europe. • In 2009, there were 378 registered insurers in Ukraine including 41 life insurance companies • The biggest insurance companies are Ingo, Skide. West, Etalon, Oranta, Aska, Grawe Ukraina, Alico AIG, TAS, Ekko, Nadiya, Generally Garant, Universalnaya, Lemma, PROsto, Avantyeh, Aura, AKU Garant, and Garant-Avto. • The State Commission for Regulation of Financial Services Markets of Ukraine is the organism in charge to provide the corresponding license to insurance companies.
CREDIT UNIONS • First CU were already known in Ukraine at the end of XIX century in Poltava. Up to 1918 there were 3000 CUs which joined almost 3 mln people. • In independent Ukraine CUs appeared in 1992. Up to 2001 activity of CUs were regulated by the President Decree on Timely Condition as to CUs in Ukraine dated on September 20 1993 № 377/93. • Now CUs` activity is regulated in accordance with the Law on Credit Unions dated December 20 2001 № 2908 -III. • In accordance with this law CREDIT UNION is non-for-profit organization founded by natural persons on cooperative basis which is aimed to satisfy the needs of its members in mutual crediting. • In order to establish a CU there must be at least 50 persons.
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