Uman NUH | today: 07/12/2020

Capitalization of the banking system as the basis of the stability of the national economy

Author(s) Nepochatenko Olena O., Doctor of Economics, Professor, Rector of Uman National University of Horticulture, Head of Department, Uman National University of Horticulture
Melnyk К. М., , ,
Prokopchuk O.T., Candidate of Economics, , Uman National University of Horticulture, Ukraine
Category Economics
year 2018 issue Випуск №92. Частина 2
pages 6-18 index UDK 336.71
DOI
Abstract Capitalization of commercial banks and the banking system of Ukraine is of prime importance in the context of globalization of the economy. Cycling financial crises make it necessary for banks to develop a strategy for adequate capital quality management to cover contingent losses. The purpose of the article is to analyze the processes of capitalization of the banking system of Ukraine at the present stage and to develop recommendations for grade and pay promotion. The results of the conducted research confirm the following conclusions: 1) the equity of a commercial bank forms the basis of its activities and is an important source of financial resources. It should be sufficient to maintain customer confidence in the bank and persuade bank creditors in its financial stability, to instill to borrowers the confidence that the bank is able to meet their needs and respond to all their obligations; 2) one of the problems of the national banking system is the lack of equity, therefore, the increase in the level of capitalization of Ukrainian banks should be a key element of their growth. According to official data of the National Bank of Ukraine during 2010–2014, the volume of equity capital of banks increased by 77,424 million UAH, and accordingly their share in total liabilities increased from 13,08 % to 15,07 %. This indicates a certain increase in equity capital by Ukrainian banks during this period. However, starting from 2015, both the volumes and the share of equity of commercial banks have started to decrease sharply due to the protracted political crisis and combat operation in the eastern part of the country; 3) the main element of the bank's own funds is the authorized capital. At the beginning of 2017, the excess of the authorized capital of the banking system of Ukraine was almost 2,5 times higher than the equity, due to record-breaking negative income of Ukrainian banks. Regulatory capital had a tendency to increase by 2015, but since 2015 there has been a decline, which is caused by a significant decrease in the number of banking institutions and insufficient capitalization of banks; 4) an important indicator for assessing the level of capitalization of banks is the regulatory capital adequacy ratio. Decrease of this indicator from 20,83 % in 2011 to 12,96 % at the beginning of 2017 was a consequence of the banking crisis of 2014-2015; 5) increasing the capitalization of individual banks and the banking system in general can be accomplished by: increasing the capital of banks at the expense of shareholders' funds or attraction of new investors; activating processes of consolidation of the banking system through mergers of banks; preparation of plans by banks for increasing the level of capitalization, taking into account their active operations; improving the quality of bank capital and ensuring a sufficient degree of capital coverage of the banks taking risks.
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