Effective functioning of financial services market players in the context of sustainable development of Ukraine's financial system

Abstract

This article aims to investigate the specificities of the effective functioning of financial services market participants in the context of the sustainable development of the Ukrainian financial system. Methodology. The study is conducted using a systematic approach and analytical methods, including legal analysis of legislative changes and comparative analysis, to examine the efficiency of financial services market participants in the context of sustainable development in the Ukrainian financial system. Specifically, a systematic analysis is performed on the activities of key participants in the financial ecosystem of Ukraine, namely banks, insurance companies, credit unions, financial companies, and pawnshops. The findings reveal a notable increase in the magnitude of activities undertaken by the primary participants in the financial market, as evidenced by the growth in their assets, liabilities, yields, and profitability. Concurrently, there has been a reduction in the number of banks, financial companies, insurance companies, credit unions, and pawnshops. This trend can be attributed to the implementation of stricter regulatory requirements and adjustments in the principles, approaches, and tools of macroprudential regulation, which have been instrumental in upholding financial stability within the Ukrainian context. An examination of the dynamics of financial stability indicators in Ukraine demonstrates that the capital adequacy of banks remained steady at 17.6% during the period spanning 2010 to 2022. However, during times of crisis, the level of financial stability in Ukraine experiences a decline, marked by heightened risks of fulfilling obligations, a decrease in Tier 1 risk-weighted capital ratio (RWA), and an increase in the proportion of non-performing loans. The analysis revealed a substantial concentration of non-performing loans (NPLs) in state-owned banks, accounting for approximately 75% of the total NPLs. Furthermore, there exists a notable concentration of loans in the private sector, with an average of 69% observed from 2010 to 2022. The profitability of the financial sector has demonstrated an upward trend since 2018, with particularly notable growth in 2019 and 2021. The level of liquidity serves as an indicator of the deposit sector's ability to withstand fluctuations in the balance sheets of financial service providers. The net open position in Ukraine signifies a significant exposure of financial companies to currency risks, particularly during times of crises, indicating a high degree of vulnerability to currency fluctuations. The practical significance of this article resides in the empirical evaluation of the efficacy displayed by financial services market participants in Ukraine. This assessment is conducted within the framework of implementing a strategy aimed at fostering the development of the financial ecosystem to support sustainable economic growth.