The modern state of the banking products and services in Ukraine and its state regulation

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Article

The modern state of the banking products and services in Ukraine and its state regulation

Ruschyshyn N. M., Candidate of Economic Sciences, Associate Professor of the Department of Financial and Economic security and Banking business Lviv University of Trade and Economics

Medynska T.V., Candidate of Economic Sciences, Associate Professor, at Department of Finance, Credit and Insurance Lviv University of Trade and Economics

Mudra R.R., Post-graduate student of the Department of Financial and Economic security and Banking business, Lviv University of Trade and Economics

Summary

The article gives a general assessment of the state of the market of banking products and services in Ukraine and its state regulation. The analysis of the number of operating banks of Ukraine and the 20 largest banks by the size of assets and the number of banking institutions with foreign and 100% foreign capital, as an indicator of the country's investment attractiveness. The results of commercial banks activity in 2018 are compared with the previous one. The dynamics of the number of payment cards by customers and types is outlined and the 10 largest banking institutions of Ukraine are determined by the number of issued payment cards, which testifies to positive changes in the banking sector and the state of this market. The concept of state regulation of the market of banking products and services of Ukraine is presented.

Анотація

Рущишин Надія Михайлівна, Кандидат економічних наук, Доцент кафедри фінансово-економічної безпеки та банківського бізнесу Львівський торговельно-економічний університет Мединська Тетяна Володимирівна Кандидат економічних наук, Доцент кафедри фінансів, кредиту та страхування Львівський торговельно-економічний університет

Мудра Роксолана Романівна Аспірант кафедри фінансово-економічної безпеки та банківського бізнесу Львівський торговельно-економічний університет

СУЧАСНИЙ СТАН БАНКІВСЬКИХ ПРОДУКТІВ ТА ПОСЛУГ В УКРАЇНІ ТА ЙОГО ДЕРЖАВНЕ РЕГУЛЮВАННЯ

У статті здійснено загальну оцінку стану ринку банківських продуктів і послуг в Україні та його державне регулювання. Проаналізовано кількість діючих банків України та 20 найбільших банків за розміром активів та кількість банківських установ з іноземним та 100% іноземним капіталом, як показник інвестиційної привабливості країни. Досліджено результати діяльності комерційних банків за 2018 рік в порівнянні з попереднім. Окреслено динаміку кількості платіжних карток за клієнтами й видами та визначено 10 найбільших банківських установ України за числом емітованих платіжних карток, що свідчить про позитивні зрушення в банківському секторі та стан даного ринку. Наведено концепцію державного регулювання ринку банківських продуктів і послуг України.

Keywords: net assets of banks, profits and losses of banks, payment cards, market of banking products and services, the concept of state regulation.

Ключові слова: чисті активи банків, прибутки і збитки банків, платіжні картки, ринок банківських продуктів і послуг, концепція державного регулювання.

Formulation of the problem

The state of the market of banking products and services is the basis for economic reforms, therefore, the functioning of this market and its participants (banking institutions) and regulation of their activities, both on the part of the state and their management from the side of the board of the bank, is relevant. However, the assessment of the market of banking products and services of Ukraine and improving the efficiency of its functioning remains a priority. The need to study and develop an effective mechanism of state regulation of the market for banking products and services is determined by the trends that are emerging in modern economic systems.

Analysis of recent research and publications. Despite the wide coverage of the state and further development of the market for banking products and services in Ukraine, all aspects of this market, which form the state, are necessary for understanding further directions and trends of its development. Among the scholars involved in studying these issues are: Alekseenko M.D., Babenko-Levada V.G., Babicheva Yu.A., Gerasimovich AM, Demchuk NI, Zhuravlyova T.O., Katan L

Kostyuchenko O.A., Mazur I.M., Parasi- Vergunenko I.M. However, issues of functioning of the market of banking products and services of Ukraine and its state regulation are still important and insufficiently researched.

Identification of previously unsettled parts of the general problem. Despite the wide coverage of issues related to the functioning of the banking products and services market in Ukraine, there is a need to assess changes in key performance indicators of this market, including: the number of operating banks, the size of net assets of commercial banks, profits and losses of Ukrainian banks and the use of payment cards issued by Ukrainian banks.

The purpose of the article. The purpose of the study is to assess the state of development of the market of banking products and services of Ukraine and its state regulation.

Presenting main material

banking product ukraine payment

Banks gradually became the main intermediaries in the redistribution of capital, in ensuring the continuity of the process of economic reproduction. With the attraction of foreign investment in the banking sector, there is an increase in supply in the market of banking products and services, gaining the trust of new customers, which will increase the demand for banking products and services. Along with this, the number of banking institutions will increase and their network will expand, which will expand the opportunities for developing the market of banking products and services.

The number of operating banks for 2017-2018 has decreased by 5 institutions and as of 01.01.2019, 77 banks (Figure 1). Along with this, the number of banks with foreign capital declined, indicating a decrease in the interest of foreign investors in investing in Ukrainian banking business, which is due to the deterioration of the investment climate and the peculiarities of the domestic banking system.

Figure 1 - Number of operating commercial banks for 2018-2019 years (as of 01.01) Source: compiled based on [1]

Ukraine has a two-tier banking system: the first level is the National Bank of Ukraine, and the second is commercial banks. The National Bank, in accordance with the law, is independent of the government by the state administration. The central bank provides loans to banking institutions, provides settlements between them, etc. The National Bank can not own state-owned shares, that is, state-owned commercial banks of Ukraine are owned by the state, and not by the NBU. National Bank is not aimed at profit, but it can arise in the process of its functioning [2].

For commercial banks, on the contrary, the main goal is to generate profit from the servicing of individuals and legal entities, investment and credit activities, and so on.

Total net assets of commercial banks amounted to 1.5% more than in the previous year. In 2018, for the first time in the last five years, the banking system of Ukraine received net income of UAH 16.4 billion, compared with 2017, losses totaled UAH 28.1 billion [1].

In table 1 lists the 20 largest commercial banks of Ukraine by the size of net assets at the beginning of 2019 (together they account for 90.52% of assets of the entire market of banking products and services of Ukraine) and their assets as of 01.01.2018, their growth is determined year. Where the first three banks on the list are classified by the National Bank of Ukraine as systemically important as of January 1, 2019, and in particular, additional state banking supervision and regulation is applied to them in order to reduce the risks of their financial instability [3].

Table 1 - The 20 largest banks of Ukraine by the size of net assets as of 01.01.2018 and as of 01.01.2019 (ths. UAH)

with a state share of ownership

with foreign capital

with private capital Source: compiled based on [1]

Therefore, a characteristic feature of today's stage of development of the domestic banking system, which today focuses attention is the transition from loss-making to profitable work. Profitability of commercial banks depends, first of all, on: optimal structure of its balance, received and paid interest on banking operations, share of non-interest income, current expenses and purposeful work of banking personnel. Important conditions for ensuring profitability of banks are optimization of the structure of incomes and expenses, determination of the minimum allowable interest margin, revealing tendencies of yield of credit operations, planning of the minimum profit margin for forecasting of the oriented level of interest on active and passive operations. The profitability of banking activity also depends on support of liquidity, management of bank risk and its minimization [4; 6, p. 23].

The state, represented by the National Bank of Ukraine, which, within its powers, contributes to the financial and price stability of the country, including the stability of this market, plays a significant role in improving the situation on the market of banking products and services. The NBU pays considerable attention to the state of the banking system and risk management.

Depending on the change in the intensity of the impact of such regulation and on the state of the environment where it is implemented, as well as variations in the instruments of state regulation of banks at certain stages of market development. Therefore, the concept of state regulation should be based on a forecast analysis of changes in external and internal factors, identifying the greatest risks for achieving the key objectives of the state policy, through which the National Bank will be able to assess the status of objects of such regulation (Figure 2).

Figure 2 - Concept of state regulation of the market of banking products and services of Ukraine Source: compiled on the basis of [6, p. 54; 7, p. 234; 8, p. 125]

This concept implies a change in the methods of implementing state regulation of market objects, as well as a change in the use of tools, depending on the development of the market for banking products and services. This concept is based on a projected analysis, where the National Bank assesses external and internal factors of influence on the banking sector, risks to improve the state of the banking system of Ukraine.

Today one of the most important tasks for commercial banks is the implementation of profitable activities and increase their efficiency in the market of banking products and services.

The net profit of banks formed after income tax is distributed according to the directions approved by the shareholders' meeting (for the payment of dividends to shareholders or for their capitalization, for the formation of general reserves and reserve funds, etc.) [9].

In table 2 shows 20 banks, whose activities in 2017-2018 were the most profitable.

Table 2 - The result of banks activity (profit/loss) for 2017-2018 (ths. UAH)

with a state share of ownership

with foreign capital

with private capital Source: compiled based on [1]

The result of banks activity (profit/loss) for 2017-2018

Among the most profitable at the end of 2017 were banks with foreign capital Raiffeisen Bank Aval, for 2017-2018. Ukrsibbank and Credit Agricole Bank. At the top 3 most lucrative banks by the end of 2017 accounted for 44.2% of the total profits received by the banking system of Ukraine [10, p. 342].

Analyzing the above data it can be argued that the transition from a loss-making to profitable activity occurred precisely in large commercial banks of Ukraine. This is due to the considerably greater opportunities of large commercial banks in providing various banking services to both legal entities and the population.

From table 3 it can be argued that for the period 2017-2018 the number of banks-members of card payment systems decreased by 10.4%, the total volume of holders of payment cards increased slightly, where along with this the number of active payment cards increased by 2091 in 2018 compared to the previous year, ie 1.1 times [3]. During this period, the number of banking self-service devices in Ukraine decreased by 481 units. During this period, the network of terminals grew 1.2 times, and the number of bank terminals decreased.

Today, the Internet banking system is actively being used, as well as clients can use ATMs, payment terminals, plastic cards of different types, but in parallel developers are working on creating new banking products that would allow them to be united and easy to use with the help of smartphones. The dynamics of the number of customers, payment cards and payment devices in Ukraine for 2017-2018 is shown in table 3.

Table 3 - The dynamics of the number of customers, payment cards and payment devices in Ukraine

However, despite the reduction in the number of banks in 2018, the network of payment terminals for this year increased by 13.4% and as of 01.01.2019 there were 297 266 units, which is by 45 585 more than in the previous year. In general, the lion's share of this increase belongs to trading payment terminals, along with the number of bank terminals in recent years began to decrease.

In table 4 shows the 10 largest banking institutions of Ukraine by the number of issued payment cards as of January 1, 2019, where, in total, they account for 92% of the total number of issued cards and 94% of the total number of active cards in the country. It also indicates the number of ATMs, payment terminals, POS terminals and the number of branches with these commercial banks.

Table 4 - The 10 largest banks in Ukraine by number Issued payment cards for 2018 year

Source is based on [3]

The volume of non-cash transactions by payment cards in 2018 amounted to: 35.8% of the transaction for transferring funds from card to card, the average amount of which amounted to UAH 1,723, 32.6% settled on the Internet, where the average amount was UAH 361., 29.3% - settlements of clients in trading networks, on the average on 242 UAH; 2.2% - operations with self-service devices.

According to the results of 2018, among non-cash transactions using payment cards, the largest number of them fell on payments in the trading network. Along with this, there is a tendency to increase the amount of money transfer operations twice to 465 billion UAH, and the share of such transactions amounted to 35.8% of the total amount of non-cash transactions.

Today, the National Bank of Ukraine is studying the changes in the structure of cashless transactions and their possible impact on market conditions, expanding the indicators of statistical reporting by payment cards. It should be noted that the share of cashless transactions performed solely on the territory of the country is 1.7 times lower, which is 43.4% of cash withdrawal transactions. This tendency shows that Ukrainians are more often cashed by their own cards abroad than on the territory of the country, as evidenced by the share (87.2%) of non-cash transactions on cards issued by Ukrainian banks abroad.

Conclusions and suggestions. Consequently, today the expansion of the sphere of banking products and services remains the key to Ukrainian banks, which will allow them to increase the number of customers and create and promote new, not only banking products and services on the market. At the same time, it allows banks, together with an increase in the client base, to expand the branch network, maintain high standards of customer service, optimize their activities, and increase the level of functioning of the banking products and services market.

According to the results of the study, it was found that the state of the market of banking products and services has improved over the last year, followed by positive trends, in particular, the receipt of net profit by the majority of banks, the development of cashless payments by customers of Ukrainian banks, including abroad. After all, obtaining a positive financial result today plays an important role in the development of strategic objectives of the bank.

Over the past few years, there have been few effective instruments of state regulation of the banking system, namely the establishment of deductions to reserve, insurance and other funds, mandatory economic standards, the mechanism of obligatory reserve, currency, interest, and tax policy, as well as the construction of a system of interconnection ' between the state authorities in implementing monetary policy, the timely supervision of compliance with applicable banking legislation by commercial banks, which has affected the aschenni of the market of banking products and services. High level of profitability of banks testifies to its solvency, stability reliability, efficiency of thе bank. Profit is needed by banks to create a reserve fund to stimulate the work of staff and management, to expand the bank's network of branches, ATMs, to improve banking operations and improve the quality of services provided, to increase the level of customer service, which will allow to increase capital, and accordingly increase the volumes offered banking products and services.

Also, for the improvement of the state of the market of banking products and services an important role is played by the realization of the tasks of state regulation, including ensuring the reliability and stability of the banking system of Ukraine, protecting the interests of bank depositors from ineffective management of banks, creating a competitive environment in the banking sector, ensuring transparency of NBU policies, which will simplify the process of efficient functioning of the market of banking products and services in Ukraine.

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