The current banking system in Ukraine is two-tiered, comprising the central bank of the country and commercial banks. The central bank of Ukraine is the National Bank of Ukraine (NBU), it controls the national currency, supervise the banking system and issue current banking regulations. Commercial banks operate under the authorization and supervision of the NBU, including the state-owned Export-Import Bank (Ukreximbank) and a specialized commercial Savings Bank (Oschadnybank).

Commercial banks are formed as joint-stock companies or as companies on an equal footing with both legal and natural persons involved. The range of commercial banks activities includes: receiving deposits of enterprizes, institutions and households, crediting of economic entities and households, investments in securities, formation of cash balance and reserves, as well as other assets, cash and settlement servicing of the economy, foreign exchange operations and other services to natural persons and legal bodies.

Numerous Ukrainian commercial banks have joined the Society for Worldwide Interbank Financial Telecommunications (SWIFT). SWIFT provides financial data communication and processing services supporting the business activities of banks around the world. Participating Ukrainian banks can instantly settle transactions with other banks on-line with SWIFT. Western Union also has a funds transfer service between Ukraine and other countries.

The National Bank of Ukraine

The primary function of the NBU is to ensure the stability of the national currency, the hryvnia (UAH). The NBU is also tasked with maintaining the stability in the banking system and price stability, within the scope of its power.

The highest governing body of the NBU is the 15-member Council. Seven members are appointed by the Verkhovna Rada and seven by the President. The Bank Governor, who is nominated by the President and appointed by the Rada, acts ex officio as the 15th member. The Council is responsible for developing the principles underlying the country’s monetary policy.

The banking sector

The Ukrainian banking system has bee n the most developed and advanced part of the financial system of the country. Aided by ongoing economic expansion and currency stability, the banking system has grown rapidly, although it has been affected by the downtown in the global economy.

Today, Ukraine’s banks are required to prepare accounts based on International Financial Reporting Standards (IFRS).

Most banking services are available in Ukraine. Intermediation costs remain fairly high, although the presence of Western banks, particularly in retail banking, should force the sector to become more efficient over time.

Commercial banks require a license from the NBU to operate. The NBU has established requirements for capital adequacy, minimum statutory capital requirements and minimum regulatory capital requirements.