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The Financial System Stability: The Essence, Vulnerability, Ways to Provide

Author

Listed:
  • Yurii Lupenko

    ("Institute of Agrarian Economics" National Scientific Centre, Kyiv, Ukraine)

  • Yurii Radionov

    (Accounting Chamber of Ukraine, Kyiv, Ukraine)

Abstract

The state financial system must function smoothly and respond promptly to destabilizing exogenous and endogenous factors that can arise at any time. Therefore, ensuring the financial system's stability and improving its mechanisms is an important component of public policy. The purpose of the article is to reveal the essence of the financial system's stability, identify internal factors of the financial vulnerability of Ukraine that may affect the effectiveness of the country's financial system, and find ways to overcome them. The content of the concept of "stability of the financial system" is revealed. It is established that the use of different terminology indicates the complexity and, at the same time, the versatility of this term. According to international experience, the country's central bank has a decisive role in assessing the stability of the financial system; in Ukraine, this function is performed by the National Bank of Ukraine. It was found that inefficient use of budget funds is one of the key factors in the financial system's vulnerability. The state of execution of the State Budget of Ukraine in 2020 is analyzed. It has been established that over the last decade, the budget has been executed with a deficit, and the existence of a significant budget deficit leads to a movement in the "debt spiral". The Government borrows a significant amount of money to implement the budget, and therefore it is becoming increasingly difficult to attract them on reasonable terms. Failure to receive the funds leads to late spending. Thus, the budget deficit, public debt, and inefficient use of budget funds are the internal factors that increase the financial system's vulnerability and undermine its stability.

Suggested Citation

  • Yurii Lupenko & Yurii Radionov, 2021. "The Financial System Stability: The Essence, Vulnerability, Ways to Provide," Oblik i finansi, Institute of Accounting and Finance, issue 4, pages 81-90, December.
  • Handle: RePEc:iaf:journl:y:2021:i:4:p:81-90
    DOI: 10.33146/2307-9878-2021-4(94)-81-90
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    More about this item

    Keywords

    financial system; stability; financial security; state budget; budget expenditures; inefficient use of funds; socio-economic development of the country;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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