Page 99 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE

Hence, banking system of Ukraine fulfils funds transformation functions

inefficiently and by itself imposes risk for financial stability.
To evaluate resistance of national banking system to currency risk we

have analyzed structure of assets and liabilities in terms of currencies (table 1.4).

Table 1.4: Loans and deposits in terms of currencies, UAH bln.
Indicator 2005 2006 2007 2008 2009 2010 2011
Deposits
share of national
currency 3/4 2/4 3/4 2/4 2/4 2/4 2/4
share of foreign currency 1/4 2/4 1/4 2/4 2/4 2/4 2/4
Loans
share of national
currency 2/4 2/4 2/4 2/4 2/4 2/4 3/4
share of foreign currency 2/4 2/4 2/4 2/4 2/4 2/4 2/4
Deposits in national
currency / Loans in 108% 93% 90% 67% 49% 61% 59%
national currency
Deposits foreign
currency / Loans in 76% 58% 43% 36% 44% 53% 65%
foreign currency
Source: estimated based on National Bank of Ukraine Bulletin

As can be seen from table, the volumes of deposits and loans increase

gradually, while banks attract deposits and place loans almost evenly in national
and foreign currencies. But starting from 2011 the share of national currency

denominated loans increased as a result of administrative limits applied with

regard to loans denominated in foreign currencies. Most rapid decline in deposit
to loans ratio in national currency has taken place in 2009. The same dynamics

with one year lag was observed and for deposits to loans ration in foreign
currency. That can be explained banks’ attempts to gain arbitrage income in

conditions of exchange rate growth, what is consistent from point of view of
income growth, but at the same time – exacerbates systemic financial risks due

to exchange rate fluctuation. Preservation of exchange rate fluctuations in

acceptable limits fall short to justify expectations of banks to gain extra profit,
what is proved by deposits-to-loans ratio stabilization.

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