DEPOSIT PORTFOLIO OF BANKING SYSTEM OF UKRAINE: MODERN TRANSFORMATIONS AND CHALLENGES

Abstract

The article examines the dynamics of the deposit portfolio transformation within the banking sector of Ukraine since 2019, focusing on its structural composition by depositor types and deposit maturities. The analysis reveals that, despite the ongoing wartime conditions, the absolute volume of residents’ deposits in the banking system continued to grow. The research identified the key drivers of this growth across various economic sectors as well, including individual entrepreneurs, non-profit institutions serving households, non-financial corporations, households, and other groups. The study reveals an increase in the share of deposits held by non-financial corporations and individual entrepreneurs, which serves as an indicator of growing financial resource turnover within the economy. At the same time, a significant rise in the proportion of demand deposits has been recorded, increasing liquidity risks in the event of mass account closures. The findings also demonstrate that households account for the majority (73–79%) of time deposits (with maturities exceeding one year) in the banking system, which serves as a foundation for its long-term sustainable operation in peacetime. A comparative analysis of deposit returns (considering taxation) with alternative investment instruments, such as government loan bonds, along with the real inflation rate, demonstrates that under current conditions, time deposits serve primarily as a means of preserving capital rather than increasing it. In this context, banks should emphasize the state guarantee of full repayment of households’ deposits. Key challenges remain the prevailing economic and financial uncertainty (martial law, reliance on external financial support), a decline in income levels for the vast majority of the population, continuous price and service inflation, distrust in the banking system, and the availability of alternative savings instruments. These factors prevent the expansion of long-term deposit portfolios and highlight the relevance of developing further instruments for preserving existing and attracting additional household resources to the banking system, and converting them into long-term deposits through personalized products, more flexible service conditions, competitive deposit returns, and state-backed guarantees.