Banking System in Ukraine

Ukraine’s banking system was formed in March 1991 when the government adopted the Law of Ukraine.”  The banking system in Ukraine is a two-tier structure consisting of the National Bank of Ukraine and commercial banks of various types and forms of ownership, including the state-owned Export-Import Bank and a specialized commercial Savings Bank.

The National Bank of Ukraine serves as the country's central bank, the main duties of which are to pursue a uniform state monetary policy for ensuring of the Ukrainian currency stability.

Commercial banks in Ukraine are formed as joint-stock businesses or as companies on an equal footing with both legal and natural persons involved.  Commercial banks in Ukraine provide a wide range of activities: receiving deposits of enterprises, institutions and households; providing credit to economic entities and households; investing in securities; forming cash balances and reserves; and providing other assets, cash and settlement services for the economy, foreign exchange operations and other services to natural persons and legal bodies.

The banks in Ukraine act in accordance with the Constitution of Ukraine, the Laws of Ukraine "On the National Bank of Ukraine" and "On Banks and Banking," the Ukrainian legislation on joint-stock companies and other economic entities, as well as with the normal regulations of the National Bank of Ukraine and their statutes.

One of the peculiarities of the banking system in Ukraine is the high concentration of capital and bank transactions among the several largest banks of Ukraine, such as First Ukrainian International Bank, Privatebank, Ukrsotsbank, Reiffeizenbank Ukraine (Aval), Sberbank, Ukreximbank, and Prominvestbank.

In spite of several state programs adopted recently to improve and develop the banking system in Ukraine, it is still far from meeting international standards.  There are numerous objective and subjective restraining factors for the development of the banking system in Ukraine, such as extremely low incomes of the prevailing majority of Ukrainians, lack of public trust in commercial banks, absence of a reliable system to guarantee bank deposits (only UAH 1,500 is guaranteed), a significant number of unprofitable enterprises, and an enormous (according to the world standards) share of cash in circulation.  As a result, the Ukrainian banking system is poorly integrated into the international financial sector.

Meantime, the banking sector in Ukraine is still quite attractive for foreign investments.  Several big banks from Russia, France and Germany have demonstrated recently their interest in purchasing Ukrainian banks.

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