Abstract
Maintaining proper financial stability of each banking institution is one of the main tasks facing the banking system of Ukraine. This enables operational control over the financial strength of banking activities.The purpose of the article is to develop recommendations on the operational control of financial stability of banking and to test them using banking institutions in Ukraine as an example.To execute operational control over the financial stability of banking, economic standards of banking regulation are grouped under the “at least” or “not exceeding” principle. To determine their change over time, Shewhart control charts are proposed.The recommendations were tested through the example of the Ukrainian banking institutions (with state, foreign and private capital). It was found out that in 2017–2019, the following three economic standards of banking regulations were not met: regulatory capital adequacy, high credit risk, and average investments; besides, there were two standards at the limit of control value: the ratio of regulatory capital to total assets and the maximum amount of credit risk per counterparty.To improve the financial status of banking institutions, it is recommended to take organizational and financial measures to change the average value of the relevant economic standards for banking regulation to a level that ensures financial stability.
Highlights
The banking system of Ukraine has a deficit of working capital, and especially investment assets, due to the loss of banking institutions’ ability to mobilize long-term resources
Strong banking institutions ensure the excess liquidity accumulation, reduce the level of the economy shadowing, and contribute to the long-term lending development, which serves as a catalyst for economic growth and increase in the population well-being
Banking control over financial stability allows assessing the success of meeting the goals set by the banking system, i.e. comparing actual achievement with indicators set by regulatory and governing bodies
Summary
The banking system of Ukraine has a deficit of working capital, and especially investment assets, due to the loss of banking institutions’ ability to mobilize long-term resources. Today, banking institutions meet primarily the current payment needs of business entities. They haven’t got a stable resource base to meet the investment needs of the real economy of Ukraine. This leads to their limited impact on shaping the logistics base of the economy. Strong banking institutions ensure the excess liquidity accumulation, reduce the level of the economy shadowing, and contribute to the long-term lending development, which serves as a catalyst for economic growth and increase in the population well-being. Banking control over financial stability allows assessing the success of meeting the goals set by the banking system, i.e. comparing actual achievement with indicators set by regulatory and governing bodies
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