Financial sector successfully weathers through the COVID-19 crisis and appropriately performs all its functions.
"The banks faced the pandemics without noticeable imbalances, with sufficient capital and high liquidity. The work on cleansing and enhancing resilience of the banking sector launched in 2015 yielded evident positive results. For the first time on the record, banks have not become a driver of economic instability during this crisis. On the contrary, they support businesses and promote future economic recovery through lending," the National Bank of Ukraine (NBU) said in a Financial Stability Report on December 21.
Measures taken by the National Bank eased the crisis impact for banks, it said.
Read alsoLarge-scale privatization fails in 2020 over coronacrisis, PM saysSince April, the National Bank employed key instruments available to a central bank to mitigate the crisis impact. Steps taken by the National bank were similar to those of regulators in other jurisdictions. In particular, the NBU suspended introduction of capital conservation and systemic importance buffers to give banks more leeway. Therefore, the banks may use capital in excess of minimum required to absorb credit losses and increase loan portfolio.
Moreover, the National Bank encouraged banks to restructure loans to borrowers who experienced temporary financial difficulties because of COVID-related restrictions.
Economy including the real sector recovers from the COVID-19 crisis. Although the growth rates of industries are uneven, corporate segment in general turned out to be resilient. Quality of banks' corporate portfolio did not deteriorate substantially.
"Conservative lending standards promoted borrowers' resilience. Timely restructurings and low proportion of exposures to vulnerable industries facilitated passing through the crisis without significant stresses. Consumer lending decelerated considerably as the crisis unfolded; both demand and the supply decreased on this market," reads the report.
Read alsoExperts forecast 6% inflation in Ukraine in 2021It is noted over the second quarter, the segment saw a substantial increase in loans past due. Thus, some banks massively restructured unsecured consumer loans. The NBU believes that risks of the sector to banks are high. Therefore, it confirms its intention to increase risk weights for these bank loans to 150% over 2021.
According to a NBU survey, Ukrainian banks maintain positive expectations for lending prospects for the next year: about 80% of respondents expect an increase in the volume of their loan portfolio in the next 12 months.