Deposits asthe main source of banking resources formation: in case of Ukraine IntroductionThe maintask of the banking system of any country is to support economic growth bystrengthening the economy with the necessary financial resources. Banks are akey element of the country’s economic system, as it is the banking system thatperforms one of the most important economic functions for the accumulation oftemporarily free funds of enterprises and the population with their furtherfocus on ensuring production in cash.Depositoperations are one of the most important economic preconditions for theorganization of the bank’s operations, since at the expense of borrowed fundsthe bulk of the bank’s needs is covered.In the faceof transition to a market, commercial banks are faced with a serious task ofcreating the optimal composition and structure of the resource base, which canbecome the basis for solving the main problem of banking”profitability-liquidity”. To solve this problem in modernconditions, it is necessary that the commercial bank carries out the formationof its resource base (ie, the attraction and attraction of funds in debtobligations and the formation of own capital), focusing on:-Maximization of commercial bank revenues;-Minimization of expenses related to the formation of bank resources;- Themaximum return on the mechanism of protection of bank resources from losses.
The objectof the research is deposits in the banking market of UkraineThe subjectof the study is the system of analysis of bank operations related to the use ofdeposit resources.The purposeof the work is to study deposit resources of banks, determination of ways toincrease the efficiency of forming a deposit portfolio of the bankIn writingthe work is widely used research of domestic specialists, materials ofscientific and practical conferences, reference literature, data of mass media,legal acts of Ukraine, Internet sources. 1 Depositresources of the bank: nature and typesThe Bank,like any other enterprise, must have a certain amount of funds, that is,resources.
The NBU uses bank resources to determine the totality of cash heldby the bank and used by it for the performance of its functions and operations.Banking resources are the financial resources of the bank, which consist ofown, borrowed and borrowed funds. Own funds are equity and stand-alone capital,as well as retained earnings. The borrowed and borrowed funds include deposits(deposits), funds from the sale of bonds and other debt securities, balances oncustomer accounts, funds received from the national bank in order to maintainliquidity, as well as interbank loans. These resources are used by banks forcredit and other active operations 6.Theattracted funds of the bank are a set of funds on current, deposit and otheraccounts of bank clients (legal entities and individuals), accounts of publicorganizations, various public funds, which are placed in an asset in order toobtain profit or provide liquidity to the bank 7.
For a more visualunderstanding, see Fig.1.Fig.1.Accountof borrowed funds of the bank 8Consequently,deposits are only part of the bank’s cats involved. These concepts are notidentical.In thedomestic and foreign economic literature there are many definitions of theconcept of “deposit”. In accordance with the Law of Ukraine “OnBanks and Banking”, a deposit is cash in cash or cashless form, in thecurrency of Ukraine or in a foreign currency, which are placed by clients ontheir registered accounts with the bank on a contractual basis for a specifiedperiod of storage or without indication such a term and payable to thedepositor in accordance with the legislation of Ukraine and the terms of thecontract 1.
It shouldbe noted that in the Economic Encyclopedia, bank deposits are treated asmonetary funds made by the bank in the form of deposits for which the bank paysinterest, and deposit resources are explained as funds placed in the bank forstorage, which are used for further payment of interest of depositors 2.A.Gerasimovich argues that the deposit is nothing more than a bank’s obligationfor temporarily attracted funds of individuals and legal entities or securitiesfor an appropriate fee 3, p.60.
R.Kotzovskayanotes that the deposit is the money or bank metals placed by depositors in thebank for the term specified by the agreement 4.M. Savlukargues that under the deposit, it is necessary to understand the funds that are”placed in the bank for a certain period of at least one month and can bewithdrawn after the expiration of this term or after the previous announcementof the bank” 5, c. 456.Consequently,most authors who were involved in the analysis of deposits, define the depositas money or money transferred to the bank for storage at a certain percentage.
However, some authors, such as Gerasimovich, consider the deposit not as fundsraised by the bank for storage, but as a loan provided by the business entitiesand the population to use the bank on favorableterms.It is worthnoting that the main source of deposit resources is the funds of individualsand legal entities. At the stage of engagement, the main task of the bank is toidentify customers who have an excess of available cash and to provide favorable conditions for placing their own resourcesin the respective bank.
Regardingthe contractual basis for attracting deposits by the bank, it is regulated bythe Regulation on the procedure for the implementation by banks of Ukraine of deposit(deposit) operations with legal entities and individuals under the number1256/8577 dated December 29, 2003, on the basis of which the involvement of thebank by deposits is confirmed by a contract of a deposit account. After thecontract is concluded, funds are transferred to the bank, therefore, the bankuses these funds at its own discretion. Basically, banks receive the highestreturn on interest rates between interest rates on deposits and loans. Thedeposit, as mentioned above, is invoiced on the terms of return, payment andterm.
Consequently, the return condition means that the deposit must bereturned to the customer’s first request or on the terms of return with thespline of the term set in the agreement. The second condition of payment is thepayment by the bank of the deposit amount and accrued interest thereon. Underthe third condition of maturity, it should be understood that the bankconcludes an agreement with the depositor for a certain period, after which thefunds should be returned to the depositor together with the accrued interest.Thedepositor places not only money or money on the deposit, he places free fundsthat are not needed now, but are postponed for future use.
Regarding thedirection, the bank is interested in the most effective way to invest itsresources, which ultimately brings maximum profit.In general,deposit accounts are divided into two types:1. Depositsto the request – the issuance of money from such deposit is carried out at thefirst request. Practically this is a regular billing account. The interest onsuch deposit is minimal. Contribution can be replenished and removed.
2. Term(urgent) deposits – such contribution is returned after the expiration of acertain period, which is determined by the agreement. It can be from one monthto several years.
On thebasis of these categories, each bank forms its types of depositsDepositstype:Savingsdeposits are traditional deposits with low interest rates and a minimum set ofconditions. Some banks are capitalizing on these types of deposits, that is,accrued interest is added to the principal amount of the deposit, increasingit. The received amount is taken into account at a further interestcalculation.
Accumulativedeposits – contributions to accumulate a certain amount of money. Typically,these kinds of deposits are offered in the framework of some programs, forexample: automobile, residential. The contribution is replenished.
Settlementsdeposits – within the framework of the agreement, a regular payment of interestis foreseen for this type of deposit, for example, a plastic card or withdrawalof a monetary amount with a mandatory minimum balance on the account.Specializeddeposits – the bank offers deposits for a certain category of citizens. Forexample: students, pensioners or bank employees.Currencydeposits – deposits can be opened not only in hryvnia, but also in othercurrency.
These types of deposits allow not only to receive interest at aninterest rate, but also to keep their savings at a lower rate of the nationalcurrency.Multi-currencydeposits – in this type of deposit the depositor has the opportunity toredistribute funds from one currency to another without losing accrued intereston the deposit.There areseveral more types of deposits that belong to the category of exotic.Nevertheless, they are in demand in a certain category of clients.
Thesedeposits include: Metal deposits – income from such deposits is accrued notonly at the expense of interest on deposit, but also depends on the change inthe value of precious metals in world markets 9.It shouldbe noted that one of the main factors used by banking institutions to attractfree cash resources of individuals and legal entities is the cost ofattraction, that is, the interest on the deposit. The bank independently setsthe level of interest rate depending on the need for funds: if a bank needsdeposit resources, the level of the rate increases, if, conversely, it eitherleaves the same level, or reduces, which allows to reduce the inflow of depositresources.
Interest rates vary not only between banks but also in one bank,that is, the level of the rate may vary depending on the size of the deposit,the term for which the funds are attracted, the type of deposit account, thesystem of payment of interest, and so on.In turn,the interest rate is influenced by the economic situation in the country, thelevel of inflation, the supply and demand for money in this market, the levelof competition among banking institutions and the size of the average marketrate. At the same time, the main factors determining the size of interest arethe internal indicators of the bank: the size of the bank, its reputation,liquidity, the ability to meet the commitments made to customers. So, byexamining the interest rates, each bank should take into account all thefactor-setting indicators when setting the interest on the deposit, thus thebank optimizes the attraction of resources. In formulating the level of therate, the bank seeks to attract cash, because for the effective functioning ofthe banking services market it is necessary to take a competitive position,because in order to meet the needs of customers it is necessary to havesufficient amount of money resources.
That is why, banks are constantlyresearching the needs of the population, improving deposit products, raisingthe level of service, etc. The effective interest rate should be calculated inorder to encourage depositors to save money on bank accounts, that is, incashless form, which firstly, such a contribution brings profit, and secondly,reduces the share of “black market”, that is, not controlled funds incirculation. 2. Analysisof deposit resources of Ukrainian banks and determination of the factorsinfluencing themIn theconditions of a market economy, the process of formation of bank resources andoptimization of their structure become of paramount importance. It should benoted that the stable development of the banking system of Ukraine depends onthe volume of attraction of monetary resources. Accordingly, one can observethat financial stability of banks, the ability to perform active bankingoperations depends on how banks will form a resource base. Since banks mainlyfocus their work on the work with the resources involved, for the improvementand stabilization of the banking system it is necessary that the free monetaryresources of the population be in banking institutions.It shouldbe noted that the banks’ liabilities for the analysed period increased by 0.
61%to UAH 1,116.3 billion.- funds ofindividuals – UAH 409 billion, or 8%,- funds ofeconomic entities – UAH 396.9 billion, or 21.2%,The fundsof individuals in banking institutions have the following growth:- fixedassets -299, 3 billion UAH, or 5.4%;-sources ondemand – 109, 8 bln. UAH or 15% ????????? ????????? ? ?????? ?? ??????? 01.
07.2015 01.10.2015 01.01.2016 01.04.2016 01.
07.2016 ????? ?????? 222 562 683 194 263 241 134 720 840 122 337 285 101 284 049 ????? ????????? ???? 312 888 782 332 699 179 356 414 631 385 031 232 396 873 782 ????? ???????? ???? 376 356 335 354 358 201 392 642 340 411 429 079 409 070 009 ???? ???????? ????? 98 601 111 98 271 004 96 854 177 100 797 049 95 987 855 ???? ????????? ?????’?????? 21 901 862 21 785 133 10 868 294 10 978 510 9 871 101 ???? ?????’?????? 4 434 915 4 216 451 3 909 249 3 883 621 3 785 371 ?????? ?????’????? 1 109 499 351 1 079 766 081 1 126 664 334 1 153 897 696 1 116 308 326 Table 1.Composite liabilities of the banking system, thousands UAH (developed on thebasis of 10) We observethat for the analysed period there was a rather significant drop in banks’funds, about 121.3 billion UAH, or 45.5%. Other liabilities of banks alsodecreased by UAH 649.5 million.
The funds of legal entities grew during thisperiod by UAH 83.99 billion. The dynamics of other balance indicators was nothomogeneous, we do not see a clear decline or growth. Funds of individualsincreased by 32.7 billion UAH. Other borrowed funds, by the end of the 2ndquarter of 2016, decreased by UAH 2.
61 billion compared with the end of Q22015. Other financial liabilities of banks also decreased by UAH 12.03 billion.Theaggregate volume of liabilities of Ukrainian banks during the analysed periodincreased by UAH 6.
8 billion. However, this is not evidence of a gradual returnof trust among Ukrainian banks to Ukrainian banks, since this growth is notsignificant, especially since it was partially due to the devaluation of thenational currency. The UAH exchange rate against the dollar in this period fellby about UAH 5.Fig.1 – Structure of deposit resources at the end of the yearby terms from 2012, until August 2016 in UAH million 10 See Appendix 1After analysing Figure 1, we can say that demand deposits arethe most in this structure for each of the analysed years, and each year thisindicator increases.
That is, on January 31, 2012, this indicator amounted toUAH 185 314 million, and as of August 31, 2016 it is already UAH 350 575million, that is, during the analysed period, it increased by 1.89 times. Thesmallest share is deposits more than 2 years, we see the dynamics of thedecline of this deposit. In 2012, it amounted to UAH 35 219 million, which is2.86 times more than in August 2016. This can be explained by the fact that thedepositor is at a high risk of non-return of the deposit, and for the bank – it is notprofitable, because it is necessary to set a high rate, which should coverinflation processes. Fig. 2 – Volume of deposit resources in national and foreigncurrency in the context of legal entities and individuals, UAH million 10 SeeAnnex 2With regard to the volume of deposits in the nationalcurrency, the data is presented in Figure 2.
Thus, it can be said thatindividuals invest considerably more funds than legal entities. This is due tothe fact that legal entities need more money to organize their business.We observe that the share of legal entities’ deposits until August 2016 grew andamounted to UAH 176 534 million on deposits in the national currency and UAH103 180 million on deposits in dollars. As for the dynamics of deposits of individuals,we see that deposits in foreign currency grew. As for deposits in the nationalcurrency, then after 2013 they began to decrease, primarily due to devaluationof the hryvnia in this period.
The next step is to analyse the dynamics of interest rates.Fig. 3 -Dynamics of interest rates on time deposit resources for 2012-2016 10 SeeAnnex 3First ofall, you should pay attention to the NBU discount rate. We see an increase in thediscount rate from 2014 onwards to the beginning of 2016, which in essenceshould lead to an increase in the interest rate on loans and, accordingly, ondeposits. However, the graph shows that this increase did not affect theincrease in deposit rates. First of all, this is due to the fact that the ratesof deposits (and loans) are an order of magnitude higher than the accounting.Under the deposits for individuals in the hryvnia, the leading banks offer upto 25.
5% per annum. Perhaps this is why this increase did not affect the timedeposits. In general, we see a decrease in interest rates on deposits for theanalysed period. This may mean that banks will reduce interest on loans toreduce the amount of bad loans and attract more customers.
ConclusionDepositresources are temporarily free funds attracted by the bank from businessentities and individuals through the conclusion of a contract, and are at itsdisposal and used by the bank at its discretion to carry out active operationsfor the purpose of profit. For commercial banks, deposit resources – the mainand at the same time one of the cheapest types of resources. An increase in theshare of this element in the resource base reduces interest costs, but theirhigh proportion weakens the liquidity of the bank.
Aspreviously noted, the purpose of managing deposit resources is to ensure thatsufficient funds are available for active operations on terms favorable to thebank, in the amount and in accordance with the procedure established by thecurrent legislation.Thus, banksprovide themselves with cash resources for active banking activities. It isworth noting that the main source of deposit resources is the funds ofindividuals and legal entities. At the stage of engagement, the main task ofthe bank is to identify customers who have an excess of available cash and toprovide favorable conditions for placing their own resources in the respectivebank. This calls for the development of effective deposit policies bycommercial banks, the introduction of qualitatively new deposit instruments inorder to attract potential clients.
Havinganalysed the statistical data that make it possible to assess the situation onthe deposit market, we can say that today, short-term deposit deposits are inhigh demand in the Ukrainian market. However, the most popular was the depositon demand, that is, funds that can be withdrawn from the bank at any time. Moreprecisely, it is money or bank metals placed by depositors in banks on theterms of deposit (deposit) on the first demand of the depositor or makingpayments according to the order of the account holder 11.Thiscontribution is used by about 62% of legal entities and 22% of individuals.Among the population, it is less popular because of lower interest rates oncontributions 12.
At the sametime, only a third of deposits are involved in foreign currency. The funds oflegal entities by one third were invested in foreign currency, and funds ofindividuals in foreign currency were almost overtaken by deposits in UAH. Thistestifies to the intentions of single clients (legal entities) to be able touse funds immediately (due to the fact that the only currency in which paymentsare made in Ukraine is the hryvnia), while others receive a profit.Analysingthe change in the volume of deposit funds in Ukrainian banks, it should benoted that during the analysed period, the total amount of funds attracted byall Ukrainian banks practically did not change (taking into account devaluationand other crisis phenomena).For theformation of optimal in terms of structure, terms and cost of depositresources, banks need: to replace the operating model of IT; to create andeffectively use the database of clients of the deposit market; implement abranding strategy that supports the image of bank stability; have such amarketing strategy for development that could anticipate the wishes ofcustomersThe mostappropriate means of achieving long-term growth of deposits is the presence ofa unique distinctive feature that reduces marketing costs and increasescustomer loyalty. If the bank currently does not have a unique bank depositproduct or idea that could stimulate the growth of deposits, it is necessary torely on time-tested components that together give significant results: thedevelopment of new bank products, the successful placement of branches,weighted interest rate policy, the system of incentives for depositors andimproving service levels.Increasingdeposit activity, both by the population and by economic entities, will allowstrengthening control over the money supply from the National Bank of Ukraineand increase the efficiency of monetary and credit policy in order to ensure astable economic development 13.