Priority of Institutional Factors Ensuring Efficient Performance of the Ukrainian Banking System

Abstract

The article examines major challenges facing the bank-based structure of financial market and its current status in the Ukrainian economy. The Ukrainian financial market is characterized by an increasing share of distressed assets of commercial banks, low level of public trust in financial institutions, increased liquidity risk, fragmentation and extremely low capitalization. The research ascertains the key factors that strengthen and improve Ukrainian market of banking services at the present stage of modernization of the national economy. Regression analysis was used to assess the effect of the household income, inflation index and index of financial market development on the level of bank deposits and the obtained results prove that the institutional determinants including the level of public confidence in financial institutions have a strong impact on the amount of household deposits.The study identifies major instruments of macroeconomic policy to improve institutional environment that may: increase performance of banking system in Ukraine; provide open access to information about financial institutions and effective monitoring of their activity; develop infrastructure of financial market on the principles of balance of interests of economic actors, consumers of financial services, financial intermediaries and the state; prevent a threat of tax evasion through transactions with financial instruments by establishing effective mechanisms that prevent running Ponzi schemes; identify, prosecute or penalize fictitious issuers of securities; reduceillegal monetary circulation; contribute to implementinginternational standards of electronic workflows in activities of government bodies andsector regulators, etc.

Keywords

• financial market
• bank-based structure of financial market
• banking system
• market of banking services
• private household deposits
• public confidence in financial institutions