Analysis of compliance with economic standards by Ukrainian banks

Abstract

Effective functioning and productive development of the banking system is a necessary condition for Ukraine’s economic development. Therefore banking supervision is an integral element of maintaining stability in the banking system. The National Bank of Ukraine implements this task by establishing regulatory and legal support for banking activities and establishing economic standards for banking activities. The paper is devoted to studying the essence of banking supervision and the establishment and monitoring of economic standards of banking as a direction of its providing, as well as assessing the level of compliance with economic standards by Ukrainian banks. The paper presents the primary economic standards that banks operating in Ukraine must comply with. The calculation of the integrated indicator is based on the values of the following standards: capital – the minimum size of regulatory capital, sufficiency (adequacy) of regulatory capital, the sufficiency of fixed capital; liquidity; credit risk – the maximum amount of credit risk per counterparty, large credit risks, the maximum amount of credit risk for transactions with persons related to the bank; investment – investing in securities separately for each institution, the total amount of investment. A methodical approach to calculating the integrated indicator of compliance with economic standards in banking is proposed. The main stages are the following: standardization of normative values, the formation of a reference vector, calculation of Euclidean distances, and determination of values of the integral index. In 2017, the integrated indicator of compliance with economic banking standards increased significantly, increasing from 0.16-0.23 in February and March to 0.60 in August. In 2018, the compliance with economic standards by Ukrainian banks was as a whole at a higher level 0.50-0.60.