Ukraine has a two-tiered banking system. The National Bank of Ukraine (NBU) is the country’s central bank. Commercial banks, including Ukreximbank, the state export-import bank of Ukraine, and Oschadny Bank, the state savings bank of Ukraine, operate under the authorization and supervision of the NBU.
The strategic objectives outlined in the National Зrogram for financial sector of Ukraine 2020:
- main goal - is to create a financial system that can provide sustainable economic development via effective redistribution of financial resources in the economy through the development of full market competitive environment in accordance with EU standards;
- to reach macroeconomic stability, including low targeted (5% ± 1% per year) inflation, absense of external sectoral imbalances, restore economic growth, which will ensure the normalization of interest rates;
- to stimulate economic deregulation and tax reform, which will ensure the influx of local and foreign capital in the economy;
- achieve strict observance of property rights and the principles of liability for damages through the implementation of judicial reform and the reform of law enforcement.
Financial Sector Development for 2009-2014 years was discrete and disproportionate nature. The banking system was growing faster than other segments of the financial sector, including emission activity in the stock market, corporate bonds, issuance of securities of joint investment institutions.
The development of non-banking financial sector has been complicated by the lack of effective legislative regulation and prudential supervision, which led to a significant amount of captive financial institutions and 'financial pyramids', that hampered the development of the financial services market and led to the crisis and deep distrust in the financial sector as a whole.
Internal shocks, mainly military conflict in the east, have adversely affected the economy, reducing consumer confidence in financial services of the banking sector and financial markets became unbalances. The reduction in economic activity, trade imbalances caused devaluation and inflation to accelerate to 30% per annum. These events led to a deterioration in the quality of loan portfolios of the banking system, which necessitated cleansing of the banking system, which began in 2014, and necessitated additional capital increases in banks to create significant reserves for active operations.
In 2014, allocations to reserves was the determining factor in losses of the banking system. The situation with problem banks' balance sheets complicates the lack of effective systems to protect the rights of creditors and consumers, especially property rights and impartial justice.