Six years ago, when Ukraine was established as an independent state, there were five banks in the country. Three of the banks were joint-stock companies and the other two were fully state owned. Nowadays, a normal two-tiered structure which includes the National Bank of Ukraine and commercial banks has been established and is operating.

The first tier is represented by the National Bank of Ukraine. As is usual for a central bank, it is the main issuing centre of the state and the main control authority for the monetary system. The National Bank co-ordinates the activities of the banking system as a whole and carries out banking supervision over the activities of banks and credit institutions. The main task of the central bank is to provide stability of the national currency, the hryvnia.

Commercial banks are the second tier of the structure. In Ukraine, 225 commercial banks are registered including two state owned banks (Ukreximbank and Sberbank (Saving Bank)) and the rest are established as joint-stock companies. Additionally, 19 banks were established with foreign capital participation including two banks with 100 per cent foreign capital share. They are as follows: Societe Generale and Credit Lyonnais of France; Credit Swiss First Boston of Switzerland; Creditanstalt of Austria; Inko of Russia and the Depository-Credit Bank of Poland. In fact, a total of 185 banks comprising 2,332 branches are operating. Moreover, about 20 representative offices of foreign banks operate in Ukraine.

It should be noted that during the last five years, banking licences were withdrawn from 41 commercial banks.

In order to understand the situation in full, we should add some financial statistics.

As of 1 September 1997 the amount of own funds of commercial banks equalled US$1.7 billion, and the total foreign exchange balances of the banks was $19.1 billion.

The share of foreign capital in the banking system of Ukraine was 10.7 per cent.

During the first eight months of 1997, commercial banks in Ukraine received profits totalling $359 million. The ratio of profits to authorised funds was 48.8 per cent and the profits to assets ratio was 1.9 per cent.

As of 1 September 1997, the credit portfolio of Ukrainian banks amounted to $409.5 million or 20.3 per cent of the assets amount.

For the time being, the banking system of Ukraine is characterised by the fact that 29 per cent of the total number of banks are facing problems. Among them are banks which are declared bankrupt by the court, banks under liquidation or those under recovery. During the first eight months of 1997, 51 per cent of banks violated the obligatory ratios specified.

However, the situation in the banking system of Ukraine can be improved. The National Bank of Ukraine together with other state authorities is working on this issue. They propose solving the problems through taking both legal and economic measures.