Bank lending in Ukraine and simulation of credit activity by methods of system dynamics

Abstract

The trends of bank crediting of businesses and households in Ukraine are determined and credit interrelations between subjects of economy by means of methods of system dynamics simulated. The article shows that by end 2020 the main trends in the Ukrainian banking sector are: 1) increasing the dynamics of return on capital, consistently high interest rates on loans until 2019 and their declining dynamics in 2020; 2) declining trends in the dynamics of the share of loans in the assets of commercial banks and the indicator of the financial depth of lending to the Ukrainian economy; 3) predominance of the share of loans to businesses in comparison with the share of loans to households in the loan banking portfolio; 4) faster growth rates of bank loans to households compared to the growth rates of lending to businesses; 5) in the sectoral context, the largest share in lending to business units is accounted for by trade and in lending to households – by consumer lending; 6) half of the loan portfolio of commercial banks are short-term loans for up to one year; 7) the share of non-performing loans in the loan portfolio remains high; 8) gradual reduction of non-deposit sources among the liabilities of commercial banks and their transition to almost full financing at the expense of customer deposits; 9) increase in the share of short-term and decrease in the share of long-term deposit financing of commercial banks. Based on the methods of system dynamics, the authors created a model that allows to trace the relationship between commercial banks-businesses-households, as well as to calculate the forecast volumes of bank loans in accordance with the demand for loans from businesses and households (weighted by the maximum value credit load) and supply of credit resources by commercial banks. From a practical point of view, determining the characteristic trends of bank lending, modeling the interaction of its main participants and determining the volume of bank loans using system dynamics helps to identify key factors influencing the supply and demand of bank credit resources at the present stage of Ukraine’s development and predict future lending dynamics.