Financial Statements at a Bank

Financial statements at a bank are the same in the form and method of preparing as at any other business or organization, but they differ a little.

The Balance Sheet of a bank gives us a view of its financial situation at one point of time, usually at any day of a particular year. But we do not know what has happened between two balance sheets. This information is provided by the Income statement (Profit and Loss Account) for the period in question. Neither statement is exactly uniform from bank to bank, but both contain certain essential features.

The largest asset of a bank is normally its total portfolio of loans. Deposits usually constitute the largest liability. Balance sheets usually include the following items listed as assets:

1. Cash on hand and due from banks - money in vaults, balances with other banks, checks in process of collection;

2. Investments - bonds, shares, etc.;

3. Loans - to companies, the general public, etc.;

4. Fixed assets - buildings, equipment, etc.

Items listed in the balance sheet as liabilities are:

1. Deposits - all money owed to depositors;

2. Taxes payable - national and local;

3. Dividends payable - decided on, but not yet paid.

The Income Statement records the income of a bank: interest on loans, return on investments, fees, commissions, service charges. The granting of credit provides the largest source of bank income. Typically, two thirds of a bank's yearly earnings result from interest on loans. Nine out of every ten money units they lend come from depositors' funds.

The following items normally constitute the main expenses in a bank's Income Statement: interest paid, salaries and other benefits, taxes.

A bank's accounting systems are designed to record and present many transactions that take place every day. Substantial reserves over and above statutory requirements are an indication to customers of the bank's strength, that it has run its business well and has retained profits in the business for future operations.

The Banking System of Ukraine

The banking system of Ukraine dates to March 1991 when the Ukrainian Parliament adopted the law 'On Banks and Banking Activities'. According to the Law the system consists of two levels, the National Bank and commercial banks.

The National Bank of Ukraine is the central financial body of the state conducting a uniform national monetary, credit and currency policy. Its aim is to strengthen the national currency, set up interbank settlement system, and coordinate and supervise the whole banking system.

Commercial banks varying in type and ownership are set up by legal entities and private persons as joint-stock companies. At present there are about 230 commercial banks in Ukraine. Two banks are state-owned (the Savings Bank and the Ukrainian Export-Import Bank), 41 banks are limited liability partnerships, 51 banks are closed joint-stock companies and the rest are open joint-stock companies. Their main functions include granting loans to businesses and individuals (backed by collateral), cash transfers and payment services, currency exchange, and other banking transactions. The banking sector of Ukraine has correspondent accounts in 193 foreign banks, (dates to 2000-01). Simultaneously, 91 non-resident banks operate around 1,600 correspondent accounts in Ukraine's banks. This supports the settlement of import-export operations.

There has been taken place the transition of our banking system to international accounting and reporting standards since January, 1998.

There was founded the Ukrainian Interbank Currency Exchange which trades efficiently Ukrainian and foreign currencies and prevents significant fluctuations in the international value of the hryvnia (UAH).

Ukraine's banking strategy is to promote and stimulate commercial banks to solve economic and social problems in the country.