EVOLUTION OF THE NATIONAL BANKING SYSTEM OF UKRAINE AND PROSPECTS FOR ITS DEVELOPMENT IN THE CONDITIONS OF MACROECONOMIC TURBULENCE

Abstract

The formation and sustainable development of national banking system of a country is an important factor in ensuring financial stability and economic security of a state. The relevance of studying the evolution of the national banking system of Ukraine is caused by the need for deep understanding of the mechanisms of its adaptation to modern macroeconomic conditions and the searching for effective strategies for further development. The purpose of this article is to study the evolution of the national banking system of Ukraine and analyze the prospects for its development in the conditions of macroeconomic turbulence as well as make practical recommendations how to improve the mechanism for managing the national banking sector during the period of post-war recovery. The study found that the process of evolution of the national banking system of Ukraine consists of seven stages: at the first stage (from 1991 to 1994) the formation of network of Ukrainian commercial banks as a component of the national banking system of Ukraine began; at the second stage (from 1994 to 1999) the corporatization of state-owned banks, the formation of new commercial banks with the expansion of private capital, the openness of a significant number of small banks focused on getting excess profits against the backdrop of hyperinflation in the country began; at the third stage (from 2000 to the first half of 2008) implement of expansionary monetary policy instruments, the deterioration of the quality of bank management, the bankruptcy of a significant number of commercial banks and an increase in the number of banks with foreign capital occured; at the fourth stage (from the second half of 2008 to 2013) the depreciation of the national currency (hryvnia), the outflow of portfolio investments of non-residents, the conversion of short-term bonds of the domestic government loan and, as a result, the “freezing” of part of financial assets occured; at the fifth stage (from 2014 to 2019) the access to investment resources of Western investors was simplified that made bank loans cheaper but, at the same time, increased external dependence of the national banking system and channels of influence of instability at the international financial markets; at the sixth stage (from 2020 to 2021) restrictive monetary policy tools, namely increasing the discount rate and the required reserve rate, limiting the emission of money, establishing administrative and legal barriers to securities transactions were used; the seventh stage began with the introduction of martial law (February 24, 2022) and continues now. The defining features of the seventh stage are a slight decrease in the number of commercial banks both based on private capital of domestic investors and those founded with foreign capital, the decrease in the efficiency and profitability of domestic banks while simultaneously increasing and strengthening the positions of foreign financial and credit institutions in the financial services market of Ukraine. For further stabilization and development of the national banking system of Ukraine the following directions are proposed: intensification of lending to the real sector and innovations, digitalization of banking services and strengthening of cybersecurity, expansion of mechanisms for guaranteeing deposits of individuals which in the future will create the basis for financial inclusion and construction of a modern digital banking infrastructure.