5 banks require increase in capital based on results of sustainability assessment - NBU

5 banks require an increase in capital based on the results of the sustainability assessment.

This is evidenced by the results of the assessment of sustainability in terms of banking institutions, published by the National Bank of Ukraine (NBU), Ukrainian News Agency reports.

It is noted that most banks in Ukraine have sufficient capital, and the banking system as a whole has a high safety margin.

The increased required levels of capital based on the results of the sustainability assessment were established for only five banks, two of which in December had an adequacy standard above the required level.

The National Bank began assessing the sustainability of banks and the banking system in wartime conditions in April 2023, after a nearly two-year hiatus caused by full-scale war.

As part of this process, an asset quality review (AQR) and performance and capital indicators over a three-year horizon was carried out for the 20 largest banks with a share of more than 90% in the sector's net assets.

The results of the assessment show that banks in general adequately assess credit risk.

Adjustments of prudential reserves according to the results of AQR amounted to only about 1%, according to the results of the verification of the value of collateral - 0.5%, as a result of the extrapolation of the results of AQR to the entire loan portfolio of some banks - less than 0.5%.

All these adjustments did not have a significant negative impact on banks' capital.

The main reason for the need for capital for the five banks was their significantly lower operating efficiency than the average for the sector.

Almost all of these banks had a low interest margin and a high ratio of operating expenses to income in the reporting period (from April 1, 2022 to April 1, 2023).

Banks for which higher required levels of capital adequacy standards have been established must submit restructuring or capitalization programs to the National Bank in the near future.

The key measures in these programs are expected to be restructuring of balance sheets and improvement of operational efficiency.

Two out of five banks, which in December already had an adequacy ratio above the required level, must at least maintain capital at the target level set for them.

The rest must ensure the level of capital adequacy in two stages:

- until the end of September 2024 - determined taking into account the marginal level of 0%;

- until the end of March 2026 - determined taking into account the limit values at the regulatory level.

As Ukrainian News Agency earlier reported, the National Bank previously updated the requirements for the capital structure of banks in accordance with the norms of the law "On Amendments to Certain Legislative Acts of Ukraine Regarding the Improvement of Corporate Governance in Banks and Other Issues of the Banking System" (No. 1587-Х of June 30, 2021).