Assessing the efficiency of Ukraine’s banking system in wartime: financial and social aspects

Abstract

Abstract: The article examines the specific features of the functioning of Ukraine’s banking system under martial law and provides an analytical review of recent Ukrainian sources studying its efficiency during wartime. The key functions of banks as a component of the state’s financial resilience are identified, with particular emphasis on the transformational function. The role of banks and the banking system in ensuring the continuity of monetary circulation, financing the government, the defense industry, and the real sector of the economy is highlighted. The study reveals the differences between the objectives of the banking system and those of commercial banks. Definitions of bank efficiency and banking system efficiency are proposed, based on the ratio of costs to results of their activities, summarized in a comparative table. The distinction between the efficiency of an individual bank and that of the banking system is emphasized, given their differing goals and functions. A new approach to assessing the efficiency of the banking system is proposed through the use of the integral indicator EBS (Efficiency of the Banking System), which incorporates financial, resilience-related, and macroeconomic indicators. Unlike existing methodologies, the integral indicators introduced in this study also take into account social effectiveness, reflecting the broader role of the banking system. The results may be applied to further improve the methodology of banking performance assessment and to formulate recommendations for enhancing the efficiency of Ukraine’s banking sector during wartime and in the post-war period. In addition, an integral indicator of the efficiency of a commercial bank is developed, based on financial ratios such as ROA, ROE, and CIR; its application enables the integration of multiple performance measures into a single metric. The analysis of active and passive operations of Ukraine’s banking system over 2022–2025 demonstrates an increase in profitability and efficiency even under martial law. Statistical data confirm that the primary source of commercial banks’ income is interest earnings from investments in government bonds. The study also stresses the insufficient fulfillment of the transformational function of the banking system and underscores its potential role as an element of national security, particularly through the financing of defense-related innovations and startups. Keywords: Banking system of Ukraine, efficiency of the banking system, integrated performance indicators EBS and IEB, ROA, ROE, CIR ratios, bank income and expenses, profits and profitability, transformational function, martial law.