FINANCIAL DEPTH OF UKRAINE’S ECONOMY: SECTORAL CROSS SECTION

Abstract

Determining disparities in the formation of the financial depth of economy enabled to trace inconsistencies in the development of banking, non-banking sectors and capital market and, therefore, to reveal the imbalance in the entire process of financial deepening. Quantitative assessment of Ukraine’s banking sector in 2000 – August 2022 using the indicators of monetization of the economy (ratios of monetary base to GDP, M3 to GDP), banking system assets (ratios of NBU’s and banks’ assets to GDP, banks’ loans to GDP, banks’ investments in securities to GDP, the shares of bank loans to business entities and individuals, the shares of bank loans with a term of up to one year, the shares of consumer and mortgage loans to individuals), the ratio of banks' capital and liabilities to GDP (the shares of business entities’ and individuals’ deposits, the shares of term deposits) indicates a gap between banking depth and the needs of real sector, namely the lack of long-term financing and banks’ orientation to quick profits. Quantitative assessment of non-banking sector depth in 2005 – Q2 2022 (using the ratio of non-banking sector assets to financial sector assets; volumes of services provided by insurance companies, credit unions, financial companies and lessors, pawnshops, non-state pension funds) shows an increase in the share of financial companies’ assets and squeezing out of insurance industry since 2015. Quantitative assessment of capital market depth since the 2000s indicates its low role in the formation of financial depth due to the lack of financial instruments with high investment properties and insignificant volumes of liquidity of securities in circulation. Activation of bank lending and securities trading on stock exchanges are singled out as directions for improving the formation of Ukrainian economy’s financial depth.