European Cooperation (Dec 2015)
LATEST SECURITY THREATS UKRAINE'S BANKING SYSTEM AND WAYS TO OVERCOME
Abstract
Government policy to maintain stability of the banking system, which was held in Ukraine over the past year and this contains a number of successful and effective measures, but on the whole was not able to provide long-term stability of the banking sector, resulting in a significant number of banks was withdrawn from the market and the cost of return of deposits in troubled banks fell on the Deposit Guarantee Fund of individuals.The main factors responsible for the crisis in the banking system: the outflow of funds raised; a corresponding reduction in assets; deterioration in the quality of the loan portfolio; rising costs of insurance reserves; a large number of loss-making banks and the banking system as a whole; decline in its capitalization; increased dependence of banks on currency fluctuations.The ways that carry out the state represented by the National Bank of Ukraine to address these problems. As part of ensuring the stability of the national currency and fight inflation: limiting emissions; further limiting the volume of liquidity provided by the NBU; strengthening the role of interest rates as the base rate of the monetary policy; improve the mechanism of foreign exchange interventions in connection with preparations for inflation targeting; ensure low and stable inflation in the conditions of a flexible exchange rate policy; reduction in inflationary pressure by stabilizing the foreign exchange market.As part of ensuring the stability of the banking system: stimulation of additional capitalization of banks by their shareholders; support the consolidation of bank capital; the introduction of new requirements for capital adequacy and solvency of financial institutions, in accordance with the principles of Basel III and other EU requirements; further improvement of the banking system by the withdrawal from the market of troubled banks; implementation of additional diagnostic tests; gradual abolition of the administrative measures imposed to curb pressure on the banking system and the hryvnia; modernization of the banking regulation and supervision in order to reduce lending to related persons; strengthening the protection of creditors' rights and improve the investment attractiveness of the banking sector; amendments to the Civil Code of Ukraine, which will make it impossible to early termination of term deposit agreements and unexpected reduction of bank liabilities; measures to attract into the banking system of additional liabilities.Implementation of these measures should ensure the stability of the monetary system of the state and increase the effectiveness of its monetary and exchange rate policy in the short and medium term.
