Page 104 - Azerbaijan State University of Economics

CONTRIBUTION OF BANKING SYSTEM INTO FINANCIAL STABILITY OF UKRAINE

believe that there is no legal basis for central bank’s responsibility for

guaranteeing financial stability. According to the Constitution of Ukraine the
main function of the National Bank is to ensure the stability of national

currency of Ukraine.

The main document, that regulates activities of the National Bank of
Ukraine is the Law of Ukraine "On the National Bank of Ukraine"

[Vidomosti Verkhovnoyi Rady (VVR) 1999, N29: 238], which was adopted
in May 1999. The law has undergone numerous amendments and the latest

ones were made in September 2012. In particular, in July 2010, the main
function of the central bank was clarified, the central bank was imposed with

responsible for national currency stability, price stability and stability of the

banking system. By doing so National Bank of Ukraine should also
encourage sustainable economic growth and promote economic policy of the

government if it does not impede the achievement of the abovementioned

objectives [VVR 2010, N49: 570]. Thus, financial stability ensuring is not
the primary function of the National Bank of Ukraine, and can be provided

only through facilitating stability in the monetary and banking areas. This
institutional inconsistency undoubtedly leads to operational failure of the

central bank to provide financial stability.
Ad hoc use of the instruments of monetary policy cannot effectively

manage the financial stability because these tools are designed to solve

different problems: stability of national currency, price stability, ensuring
reliable payment system etc.

Therefore, the influence of monetary instruments is often indirect
and comes into effect after long time lags. This does not rule out any

conflicts between the long-term financial stability goals and current
problems in the monetary field.

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