Despite some problems, the banking sector in Ukraine is improving, says the National Bank of Ukraine, after having performed a stress test of the sector.
The pandemic is still affecting daily life for people and businesses, but it doesn’t seem to have affected the Ukrainian banks. The National Bank of Ukraine recently conducted a so-called stress test of the banks in Ukraine, and it showed that they are in good shape and can cope with external shocks, writes the National Bank in a statement.
The stress test used computer-simulated models to see how the different banks would respond to different economic scenarios. It could be disasters or economic problems such as the financial crisis back in 2008. 30 banks in Ukraine were tested.
“The banking sector is now quite resilient and ready for the planned increase in capital requirements, despite the impact of last year’s crisis,” the National Bank of Ukraine wrote.
“However, a number of banks need to take steps to strengthen their resilience to possible crises in the future,” wrote the National Bank, “Although the number of banks for which the results of stress testing revealed risks to capital has not changed significantly compared to 2019, the estimated need for capital has decreased significantly.”
A few banks had problems
The National Bank of Ukraine concluded that 20 out of the 30 banks had some capital risks that need to be sorted, but many of them are minor problems. The bank wrote that problems often come from such things as high cost and short term financing, high administrative costs, and an unsatisfactory financial condition of some large borrowers.
“To ensure sustainability, banks must continue to comply with the capital adequacy requirements set by the National Bank or take measures to reduce the risk profile through restructuring measures. These measures may include improving the quality of the loan portfolio, optimizing the structure of assets and liabilities, adjusting the business model.”
The banking market collapsed back in 2014 after the problems in PrivatBank, which Ukraine nationalized after it was found that its owners had stolen around five billion dollars. The bank was on the brink of collapse. Since then, the Ukrainian government and the National Bank of Ukraine have been cleaning the sector.
Kristian Andersson, the head of the Swedish bank SEB in Ukraine, previously told Ukrainenu that the banking sector has improved ever since.
“Financially, Ukraine is a completely different place than in 2014. The same is Ukraine when it comes to banks… Over 100 banks, which were probably not quite banks, closed after 2014, and this has made the whole sector much stronger,” Andersson said.