Banking system stability in the context of the relationship between banks and the state

• Main Author: Kornіvska Valerіa O.
• Format: Article
• Language: English
• Published: PH "INZHEK" 2020-09-01
• Series: Problemi Ekonomiki
• Subjects: public and financial liquidity circulation; refinancing; relationship between banks and the state
• Online Access: https://www.problecon.com/export_pdf/problems-of-economy-2020-3_0-pages-155_166.pdf

The article presents the results of a study of the banking system stability under the conditions of increased financial support from the state during the financial and economic destabilization. The banking system stability in the euro zone has been analyzed to assess the prospects for monetary and financial development in Ukraine. The European experience proves that strengthening relations between banks and the state amidst the financialization process is harmful. The author of the article treats this relationship as a closed-loop problem of public and financial liquidity circulation, which leads to financial bleeding in the real economy and destabilization of the financial system, as a whole. This problem requires to be fixed by reducing banking transactions with government securities. The article gives facts proving that the search for solutions to this problem made in the European financial space has become one of the factors of financial and institutional transformations in the euro zone and the EU, in general, and has led to the creation of a banking union. The newly introduced legal framework has manifested itself as unable to stimulate efficient financial distribution. It has also been demonstrated that due to the public and financial liquidity circulation the banking system becomes subject to profound redesigning, thus losing its ability to conduct effective financial distribution in the real sector of economy.