Risks can grow. The NBU told what is happening in the banking sector and loans from the IMF

2017 was successful for the Ukrainian banking system. Now systemic risks are moderate, however they can grow next year. Among the key risks – termination of cooperation with the International monetary Fund, slow structural changes in the economy, low efficiency of state banks and the weakness of the legal system.

This is stated in the fourth financial stability Report, which was published by the national Bank.

What is happening in the economy

In the second half of 2017 there have been no significant changes in the macroeconomic environment. Economic growth has been slow but will accelerate to 3% in 2018.

Exchange rate volatility was moderate.

Inflation higher than expected in the beginning of the year and exceeds the goal of the NBU. High inflation makes it difficult for medium and long-term lending. To reduce the risk of inflation in the fourth quarter, the national Bank has twice raised the discount rate in General, 2% to 14.5%. These decisions should not affect the long-term downward trend in interest rates, convinced the national Bank.

The banking sector is profitable

After completion of the treatment stage the banking sector is again profitable, the trend will continue next year. The key short-term challenge for banks – introduction of IFRS 9 (international financial reporting standards). The transition to the new standard may significantly affect the banks ‘ own capital. Impact on regulatory capital will be less.

The problem with the IMF, and its possible future

Long delay in receiving the next tranche from the IMF – the main risk to financial stability, the national Bank noted. Cooperation may even be suspended, since the main creditor requires reforms, implementation of which in Ukraine are tightened.

“Without the support of international institutions, the successful refinancing of $ 20 billion of sovereign and government-guaranteed debt with maturities in 2018-2020 unlikely. Ukraine should start negotiations on launching a new program of cooperation with the IMF to end the current at the beginning of 2019,” – said the NBU.

See also:

Where the hryvnia falls and what will happen to the dollar. Not optimistic forecasts of experts

Consumer lending

After a three year pause began lending to households and businesses. The restoration started with the retail segment. The banks are building up portfolios of loans to individuals, primarily consumer. The level of penetration of loans to individuals Ukraine is in last place in Europe. The NBU expects that in the next few years, the growth rate of loans to households will be very high.

Now retail lending has a major impact on private consumption, therefore, does not create a significant risk to inflation and the current account of the balance of payments. Therefore, the national Bank sees no need to take immediate measures to contain retail lending. The NBU will focus on the development of retail lending in order to prevent possible risks. If necessary, you will set more stringent requirements to the credit risk assessment by banks on such loans or applied tools macroprudential policy to curb excessive lending. Twice a year the NBU will report on the status of development of consumer crediting and issue early warnings for risks and measures for their minimization, promises the regulator.


Rates on deposits are at historic lows of hryvnia – the lowest in the last five years. Given the reduction of funding, the NBU expects a significant decline in rates on loans over the next 12-18 months.

Corporate and mortgage lending

The national Bank assures that, to accelerate the corporate and mortgage lending should strengthen the rights of creditors. Keep the recovery mortgage lending high interest rates, however, the new mortgage will be affordable in 2018. Secured long-term mortgage loans is less than 5% of new loans, this figure will increase in subsequent years.

The main obstacle to the revival of mortgage lending in the medium term – inadequate procedures for the recovery of collateral in case of default by the debtor obligations on the loan. Without reforming the mortgage to rely on the available residential mortgages is not necessary.

The financial condition of enterprises is not a factor that constrains the recovery of corporate lending. In the real sector, profitability in most industries exceeds pre-crisis levels. Enterprises generate sufficient funds to timely service the loans, appears more attractive for new lending companies. While maintaining macro-financial stability and progress in the protection of the rights of creditors should be expected to accelerate the growth of new loans to businesses, primarily small and medium.

The domestic banking sector risks

Key domestic risks for the banking sector unchanged for the last years the dominance of state banks and a significant share of problem loans in Bank portfolios. Development strategy of the state of the banking sector needs to be finalized promptly, any delay in its implementation will lead to additional losses of the budget to cover future losses of the state banks, noted in the NBU. The program should clearly define the time frame to reduce the state’s share in the banking sector. Banks need to actively address issues of bad loans, using the mechanisms of restructuring and write-offs.

New regulation of the national Bank

During the years of crisis, the NBU focused on normalization of the banking sector. Now the focus of the regulator shifts to preventing future crises and the consequences of them for the banking sector. In 2018, the regulator intensively to harmonize requirements for the banks with the recommendations of the Basel Committee on banking supervision (Basel III) and the European directives.

In 2018 it will impose a new liquidity standard – the liquidity coverage ratio (liquidity coverage ratio, LCR). It will strengthen the stability of banks to sudden outflows of funds. Also next year the NBU will provide to the banks a draft regulation that defines the new structure of regulatory capital and criteria for the acceptability of its components. All the innovations will be introduced after a detailed quantitative analysis and consideration of their impact on the banking sector.

Will also conduct annual stress tests of banks. Independent auditors will conduct analysis of asset quality of all banks, and the NBU will perform regulatory stress testing. Will check banks, whose assets in the aggregate are not less than 90% of the total assets of the banking sector.

Also, the NBU will continue to raise the standards of disclosure by banks of financial and prudential reporting. 2018 will begin publishing reports on the structure of regulatory capital. Further requirements for the disclosure statements will be tightened. NBU aims to provide full transparency of activities and financial condition of banking institutions.


  • inflation
  • economy
  • the Bank
  • credit
  • National Bank
  • IMF

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The national Bank of Ukraine

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