Page 97 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE

Chart 1 – Financial indicators performance in Emerging Markets countries

as of end-4Q 2011 (Source: estimated based on Preliminary results of banking
activity (NBU, March 2012); Financial Soundness Indicator (IMF, July 2012))

Compared to other countries, banks in Ukraine:

- have sufficient assets liquidity, while NPLs volume is higher than
in other countries;

- the most part of banks’ income arrives from interest margin, what is
common practice for emerging markets;

- ROA and ROE are extremely low;
- capital adequacy ratio is met, hence banks are able to pay off in time

all of their obligations accumulated as a result of credits, trade and other

operations;
- regulative capital to risk-weighted assets ratio in Ukraine is in line with

average value among peer countries, that proves appropriate distribution of risk

between banks’ owners and creditors and compliance with international standards
of bank supervision.

Hence, in terms of quality and efficiency of assets, banking system of
Ukraine is in line with other peer emerging markets countries. Although lack of

assets liquidity, significant volumes of NPLs, low capitalization of banking
system, and high susceptibility to business environment testify high systemic risks

of national banking system.

One of the most important parameters of each banking system is its
efficiency, which is identified by quality of key banks functions performance. In

particular, one of these key functions is ability of banking system to manage
financial risks through identification of sources of this risks and their elimination.

One of the possible sources of financial risk for bank is misbalance in its assets
and liabilities. Correspondence of assets and liabilities in terms of maturity, currencies

and structure defines liquidity risk, interest risk, and currency risk exposure for bank.

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