ANALYSIS OF THE EFFICIENCY OF FUNCTIONING OF THE BANKING SECTOR OF UKRAINE
Authors: PAVLOVA Olena , DERZHAI Oleksandr , DERKACH Oksana , SATSYK Valentina ,   Lesya Ukrainka Volyn National University
Published: May 2023

The banking system has always been essential to the country’s economy. Moreover, it is essential in the current economic conditions because to stabilize the financial and economic situation in Ukraine, a reliable, working and developed banking system is necessary. To ensure it, it is necessary to study the efficiency of the banking sector of Ukraine and identify the factors that affect it. This determines the relevance of measures to reform the banking system, considering the current situation. The article summarizes the concept of “efficiency of banking activity,” identifies the factors that affect the level of efficiency and considers the criteria for assessing the efficiency of banks depending on the subjects of banking activity. The dynamics of the number of existing banks during 2015-2022 are analyzed, and the leading indicators of banking activity and the results of banks’ activity are considered. The directions of improving the efficiency of banks, in particular, the growth of income, reduction of costs, and reduction of risks associated with the performance of banks’ duties are proposed. To increase the profitability of the bank, the following measures can be proposed: 1) to increase the bank’s funds, which will contribute to the growth of the bank’s resource base and, accordingly, their investment potential; will be one of the prerequisites for attracting foreign investment; will stimulate integration processes; will ensure the bank’s independence and create conditions for the survival of banks in a period of increased competition in the market; 2) the bank’s funds should be rationally and efficiently placed to ensure its financial stability. Fulfilling this condition will eliminate contradictions between liquidity, reliability, and profitability; 3) financial planning. Banks incur many costs as a result of uncoordinated actions of different departments among themselves. The financial plan allows for the forecasting of the bank’s income, expenses, and profit for the year. Moreover, although in the current conditions in our country, due to instability, and inflation, accurate data may differ significantly from the plan, the proportions remain virtually unchanged. The banking institution should see the prospects of its development and goals for the current year; 4) form sufficient insurance reserves and reserve funds. Since the main reason for bank failures is the non-repayment of previously issued loans, the formation of these funds will strengthen the bank’s reliability and stability, and hence the banking system of Ukraine, and reduce possible financial risks in lending activities. The creation of these reserves will guarantee the coverage of accounts in the bank’s activities and help maintain its liquidity at the required level; 5) to apply such instruments in banking activities that allow both planning and obtaining additional profit. We are talking about futures, options, forward currency transactions, and other forms of activity that meet the conditions of market relations; 6) systematically and comprehensively study credit risks and take measures to reduce them. To this end, it is necessary to organize credit risk management departments; 7) improve professionalism. Thus, due to the war and unstable economic situation in Ukraine, the efficiency of the banking sector has significantly decreased. The efficiency of the banking system is influenced by the following factors: ownership structure in the banking sector; changes in operating activities; share in the deposit market; capitalization of banks, etc. Banks’ profits decreased by 72.44%, while expenses increased by 62.86%. Therefore, it is necessary to develop an effective mechanism to increase revenues, reduce costs and use the profits. It is also necessary to identify ways to increase profitability, which will reduce risks and increase the banking system’s profitability.