To evaluate the true state of the banking sector, the National Bank of Ukraine is launching a resilience assessment of the banks and the banking system. In 2023 this assessment will have a number of distinctive features due to war as part of a three-stage resilience assessment:
- The first stage includes an asset quality review (AQR) and an assessment of the eligibility of collateral used in the banks’ credit operations, as well as an assessment of the value of property received by the banks’ as collateral and the calculation of capital adequacy ratios.
- The second stage involves extrapolating the results of the AQR and the collateral eligibility assessment to the banks’ credit operations that were not included in the sample at the first stage.
- The third stage assesses the NBU’s performance indicators under the baseline scenario and defines the necessary levels of capital adequacy ratios. The terms of reference and forecast indicators of the NBU’s operation have been published on the NBU’s official website.
In 2023, 20 banks will undergo the resilience assessment. Those include financial institutions that are leaders in terms of aggregate indicators of the amount of risk-weighted assets and retail deposits and loans. The total amount of these banks’ net assets accounts for over 90% of the banking system’s assets. Source
In a separate release, the NBU announced the results of a survey showing the maturity of bank funding has increased for the first time since the survey was launched in 2021, and this trend will continue over the next 12 months. According to the respondents, the average cost of funding increased in Q1 2023. The financial institutions noted that retail deposit rates have been growing steadily since the survey was launched in 2021. In the latest survey, 93% of the banks reported an increase in the cost of retail funding, which is a record-high percentage.