The National Bank of Ukraine (NBU) has completed the first stage of assessing the stability of banks and the banking system, which was launched in May to determine the real state of the banks' credit portfolio during the war.
This is stated in the message of the NBU, Ukrainian News Agency reports.
Within this stage, an assessment of the quality of assets and the acceptability of collateral for credit transactions of 20 largest banks with a total share of more than 90% of the net assets of the entire banking system was carried out.
The results of the first stage confirmed the expectations of the National Bank about the banks' proper assessment of the quality of loans. As a result of the asset quality assessment, the aggregate credit risk adjustment amounted to about 1% of its volume according to the banks.
Therefore, most banks adequately assess the potential losses of the loan portfolio and reflect prudential and financial reserves for loan impairment.
The second and third stages of assessing the stability of banks are ongoing, and their completion is scheduled for December 2023.
The preliminary results of the assessment of the stability of banks are optimistic: increased requirements for capital adequacy standards may arise only in a few institutions, most of which already have sufficient capital reserves, in particular due to accumulated profits.
The banking sector as a whole has adapted to operating in conditions of full-scale war and shows clear signs of growth.
According to the Banking Sector Review for the third quarter, corporate lending is recovering after the recession caused by the invasion of the russian federation, while retail lending is growing in all segments.
Banks maintain high profitability indicators, which ensure further capital growth.
Despite the expected increase in the bank income tax rate, capital growth will continue.
Taking into account the previous results of the bank stability assessment and the current state of the sector, the National Bank is resuming previously suspended regulatory requirements for banks and introducing new ones.
These requirements correspond to Ukraine's obligations regarding the implementation of European Union legislation regarding capital adequacy and liquidity of financial institutions, as well as the Basel recommendations.
So, banks need to take into account in their activities the restoration of the following requirements:
- from December 29, 2023, 100% of operational risk will be taken into account in the capital adequacy standards (currently, only 50% of the calculated amount is taken into account). Also, in 2024, it is planned to resume determining the size of operational risk on the basis of updated annual financial statements for 2021-2023;
- updating and submission of business recovery plans by banks to the National Bank - by October 1, 2024.
In addition, banks should take into account the current requirements, which, in particular, provide for phased schedules regarding:
- deduction of non-core assets from capital in the amount of 100% from December 29, 2023 (currently only 75% of the estimated amount is deducted);
- from January 1, 2024, the inclusion of funds on accounts in other banks in the amount of no more than 60% to high-quality liquid assets during the calculation of LCR (currently - no more than 80%);
- introduction of the internal capital adequacy assessment process (ICAAP), namely:
a) by January 1, 2024, banks must develop internal documents regarding the ICAAP process;
b) until May 31, 2024, banks must provide reports on the ICAAP process in test mode.
According to the National Bank's estimates, taking into account the previous results of the bank stability assessment and the current state of the system, the available capital stock of most banks is sufficient for the comfortable fulfillment of the listed requirements, despite the expected introduction of a temporary additional tax on bank profits.
Restrictions on the distribution of profits will remain in place until the banks fulfill the specified requirements.
In the future, taking into account the state of the banking system and the final results of the stability assessment, the terms and plans for activating capital buffers (conservation, systemic importance, systemic risk, countercyclicality) will be determined.
For the further harmonious and sustainable development of the sector, banks should take into account the results of the sustainability assessment and plans for the implementation of regulatory requirements in their business strategies and, if appropriate, update them.
The specified changes are aimed at implementing the provisions of European legislation and should become decisive in ensuring the stability of the banking sector, its competitiveness and investment attractiveness.
As Ukrainian News Agency earlier reported, in May of this year, the National Bank approved the Terms of Reference for assessing the stability of banks and the banking system of Ukraine in 2023.
Who we are: About us, Contacts. How we write news and our principles: Editorial code. We did our best. If you found this valuable – please support us.
To request a correction, please send an email.