Public Banks in Ukraine: Supports and Challenges
"Financial Studies" published by “Victor Slăvescu” Centre for Financial and Monetary Research, 2A/2015
14 Pages Posted: 13 Sep 2015
Date Written: May 4, 2015
This paper investigates the effect of private and public ownership in banking sector of Ukraine using data from 2005 to 2015 including periods of the rapid growth of banking sector - from 2005 to the Q4 2008, the fall due to the impact of the global financial crisis - Q4 2008 - Q3 2009, the slight, very volatile growth in the post-crisis period - Q4 2009 - Q4 2013, the significant reduction for almost the entire 2014. Our results confirm the high trust of households in public banks during the crises due to solid confidence to government. The full compensation plays in this context only additional role. We calculate the most important financial soundness indicators for Ukrainian banks, such as loan-to-deposit ratio (LTD), equity multiplier, share of loan loss provisions (LLP) in loan portfolio, ROE and ROA and analyze them in dynamics. We find out that all the indicators are more volatile for public banks than for private banks. The LTD ratio in public banks in ‘good’ periods is less than in private banks and in ‘bad’ periods conversely. The Ukrainian public banks are overcapitalized after financial crisis 2008 - 2009. The LLP to loan portfolio ratio is much higher for public banks, especially after nationalization of troubled banks. Government as owner of troubled banks does not show quick positive results. Therefore, ROE and ROA for public banks are significantly lower in crises and slightly higher in stable periods, than for private banks. As a result, we cannot claim that public banks may effectively influence on soundness and development of Ukrainian baking system. It is necessary to provide a more in-depth research of this problem.
Keywords: financial intermediation; emerging markets; financial soundness; financial crisis
JEL Classification: G18, G21, P34
Suggested Citation: Suggested Citation