National Bank returns pre-war assessment of banks for sustainability

The Board of the National Bank of Ukraine has approved the concept of assessing the sustainability of banks and the banking system in 2025 (Concept).

This is stated in the NBU's message, the Ukrainian News agency reports.

After a four-year break, the assessment of the sustainability of banks and the banking system will be carried out according to the standard procedure, with the involvement of external auditors in assessing the quality of assets and the application of an adverse scenario within the framework of stress testing.

According to the Concept, the sustainability assessment will include three stages:

- Stage I "Asset Quality Review (AQR)". AQR is mandatory for all banks and will be carried out by independent auditors. It involves checking the quality of the base sample of assets and the eligibility of collateral for them in accordance with the requirements established by the NBU for assessing credit risk. If, after reviewing the basic sample of assets, auditors detect a significant number of errors in the assessment of credit risk (above the threshold values), they should conduct an in-depth review of a larger sample of assets;

- Stage II "Extrapolation". Provides for extrapolation of the results of the in-depth review of assets within the AQR and will be carried out by the National Bank only for banks for which an in-depth review was conducted;

- Stage III "Stress testing". Will be carried out by the National Bank under the base and adverse scenarios according to the financial statements of banks with a forecasting horizon of three years.

Stage III will apply to the largest banks in terms of the volume of funds of individuals, risk-weighted assets and the volume of loans to individuals, as well as banks that needed capitalization according to the results of the 2023 sustainability assessment.

According to preliminary estimates, this approach will involve stress testing about 20 banks and will provide a sample of over 90% of the net assets of the banking system.

The stress assessment will be carried out as of January 1, 2025.

The indicative schedule for the stress assessment in 2025:

- December 2024 – approval of the Terms of Reference for the stress assessment and the list of banks to which the stress test will be applied;

- April 30, 2025 – completion of Stage I and submission of the asset quality assessment report by auditors to the National Bank;

- July 10 / August 10, 2025 – approval by the NBU of the assessment results for stage II / stage III banks and sending, if necessary, requirements for the preparation of programs;

- August 1, 2025 – banks reflect the results of the asset quality assessment in their reporting;

- August 15 / September 15, 2025 - submission by banks of the results of Stage II / Stage III programs to the NBU;

- December 31, 2025 - implementation by banks of the programs approved by the NBU and publication of the results of the 2025 stability assessment.

As the Ukrainian News agency earlier reported, a regular assessment of the stability of banks in Ukraine has been carried out annually since 2018, with the exception of 2020-2022, when the assessment was not carried out due to the coronavirus crisis and full-scale invasion.

After a break, the assessment was resumed in 2023 as of April 1, but with a number of features.

According to the results of this assessment, most banks in Ukraine had sufficient capital, and the banking system as a whole had a high margin of safety, while individual banks are implementing capitalization / restructuring programs agreed with the NBU.

A new assessment was not carried out in 2024, as the previous results remained relevant.

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