Money and credit - Ivanov V.М.

25.8. Regulation of liquidity of commercial banks

Ensuring the financial stability of banks is a necessary condition for the effective functioning of the economy. The bank as a commercial enterprise is interested in the most profitable investment of available credit resources. The desire to maximize profits determines the investment of funds in operations that have an increased degree of risk. Solving the dilemma of "reliability - profitability" is subject to regulation of liquidity of commercial banks. The bank's liquidity is understood as its ability to fulfill its obligations to customers.

The Ukrainian legislation regulates the liquidity of commercial banks assigned to the NBU with the application of economic and administrative methods.

According to the law, commercial banks are obliged to observe economic standards established by the NBU in their activity.

Norms for regulating the activities of banks and measures of impact for their violation are given in Table. 5.

The procedure for calculating the ratios, the timing of reporting on their implementation and the sanctions for non-compliance were determined by the National Bank of Ukraine in Instruction No. 10 "On the Procedure for the Regulation and Analysis of the Activities of Commercial Banks" approved by the Board Decree No. 343 of December 30, 1996 and December 30, 1997 No. 469.

Table 5

Obligatory economic standards regulating the activities of commercial banks and measures of impact for their violation

Name of the standard	Normative value	Measures of impact for violation of the norm
1	2	3
Minimal amount of capital H1	For banks registered before 01.01.96, as of 01.01.98 - 2 million euros, and as of 01.01.99 - 3 million euros	Revocation of license for all or separate operations
The minimum amount of the authorized capital of H2	For local banks - 1 million euros, in the region - 3 million euros, throughout Ukraine - 5 million euros	Revoking a license for individual or all operations
Solvency of Н3	Not less than 8%	Fine
Capital adequacy H4	Not less than 4%	Fine
Bank capital categories H5	Depending on the amount of capital and authorized capital, banks are divided into three categories	Recommended restriction on the distribution of income
Liquidity of H6, H7, H8	H6 not less than 20%; H7 - 100%; Н8 - 20%	Fine
Maximum exposure per borrower H9	Should not exceed 25%	Fine
The maximum size of large credit risks H10	Should not exceed 8 times the size of the bank's capital	Increased requirements for solvency of the bank
The maximum amount of loans, guarantees and guarantees given to one insider, H11	Should not exceed 5 %	Fine
The maximum aggregate amount of loans, guarantees and sureties granted to insiders, N12	Should not exceed 40%	Fine
The maximum size of interbank loans H13 issued	Should not exceed 200%	The ban on participation in loan auctions of the NBU

End of Table. 5

1	2	3
Refinancing H14	Should not exceed 300%	The ban on participation in loan auctions of the NBU
Investing in H15	Should not exceed 50% of the bank's capital	Fine
Open currency position Н16, Н17, Н18, Н19, Н20, Н21	H16 not more than 40%; N17 for each foreign currency is not more than 20%; H18 in all banking metals no more than 10%; Н19 not more than 50%; H20 not more than 30%; H21 not more than 15%	Fine

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