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.

Date: 2015-01-11; view: 1329