On February 18, 2015, the parliament hearing on “Ways to stabilize Ukraine’s banking system” took place in the Verkhovna Rada of Ukraine.

The representatives of the financial elite assembled at the debating chamber to offer concrete proposals on how to address the problems facing our country. Over 40 honorable keynote speakers, including Governor of the National Bank of Ukraine Valeriia Gontareva, Chairman of the Verkhovna Rada Committee on Financial Policy and Banking Serhii Pybalko, Representative of the President of Ukraine in the Verkhovna Rada and former Governor of the National Bank of Ukraine Stepan Kubiv, former Governor of the National Bank of Ukraine Volodymyr Stelmakh, Deputy Minister of Finance of Ukraine Vitalii Lisovenko, Deputy Managing Director of the Deposit Guarantee Fund Andriy Olenchyk, Ukrainian MPs, representatives from relevant NGOs, CEOs of banks and non-bank financial institutions, experts and academic scholars took the floor at the parliamentary hearing.

In her speech Governor of the National Bank of Ukraine Valeriia Gontareva noted that the macroeconomic situation remains challenging. “Under such conditions, the main function of the National Bank of Ukraine is to preserve the purchasing power of the hryvnia. We should focus our efforts on achieving low rates of CPI inflation,” she said.

In particular, according to Valeriia Gontareva, in 2015, the National Bank of Ukraine would focus its efforts to contain inflation along the following fronts: the regulator to embark on a more stringent monetary policy, administrative restrictions in effect in the foreign exchange market to be gradually lifted, the foundations paving the way for the adoption of inflation targeting regime to be laid. Net international reserves, net domestic assets and monetary base will be considered operational benchmarks of monetary policy.

The Governor of the National Bank of Ukraine also added that the regulator would remain committed to the policy aimed at enhancing the resilience of the banking sector. It is to this end that the National Bank of Ukraine is set to proceed with banking sector reforms, guided by the Three “C” principle: capitalization, consolidation, and concentration.

The Governor of the National Bank of Ukraine gave the floor to Volodymyr Stelmakh and Stepan Kubiv, former governors of the National Bank of Ukraine, who emphasized the need to restore confidence between banks, authorities and the public and gave their view on what further steps need to be taken by the regulator on the way towards the development of the banking system.

Deputy Managing Director of the Deposit Guarantee Fund Andriy Olenchyk delivered a relevant speech in which he briefed the attendees on the funding capacity of the Fund. "Does the Fund have enough funding to fulfill its mandate and meet obligations undertaken by the government under the Deposit Guarantee Scheme, a question often raised by the public? We can give a clear and unambiguous answer to this question: “Yes, surely it does," emphasized the Deputy Managing Director of the Deposit Guarantee Fund. Andriy Olenchyk also expressed his confidence that the future looks bright for the banking industry. "We will tough it out and live through this year. Following a clean-up of the banking system, Ukraine will get a revamped banking industry, and our people will have the future they deserve.

In her turn, Tamara Smovzhenko, the Principal of the University of Banking of the National Bank of Ukraine, threw her weight behind the overall view expressed by the keynote speakers that confidence lies at the core of the banking system. “A workable system of domestic investments, which should be accumulated and channeled in the right direction by the sound and stable banking system, represents the  backbone of the economic development of the country, with public and individual confidence in the banking industry lying at the core of the financial stability of the banking system,” said Tamara Smovzhenko

The banking community was represented at the parliamentary hearing by CEOs of the largest Ukrainain banks. Among those who spoke at the parliamentary hearing were Oleksandr Dubilet, Chairman of the Management Board of CB PrivatBank PJSC, Volodymyr Lavrenchuk, Chairman of the Management Board of Raiffeisen Bank Aval JSC, Viktoria Mikhalyo, Chairwoman of the Management Board of Alfa-Bank PJSC, and Roman Shpek, Chairman of the Board of the Independent Association of Ukrainian Banks. The bankers called for the need to introduce new funding instruments and the need to keep the discussion at the professional level, rather than attempting to replace it with populist slogans. In his speech, Roman Shpek pointed out that trust between borrowers and lenders, depositors and banks is, in broader terms, part of macroconfidence. “This is what is internationally called "business confidence". We primarily refer to the public confidence and market confidence in the authorities, in their institutional capacity to deliver what was promised,” said the Chairman of the Board of the Independent Association of Ukrainian Banks.

Chairman of the Management Board of Raiffeisen Bank Aval JSC Volodymyr Lavrenchuk emphasized that nobody is winning from the crisis of confidence in the banking sector. “Without concerted efforts to address the problem, we would not emerge from the crisis," said Volodymyr Lavrenchuk urging the market participants to consolidate their efforts.

Wrapping up the parliamentary hearing, Deputy Chairperson of the Verkhovna Rada of Ukraine Oksana Syroid said that the state of the banking system is one of the key markers of mutual trust between the state and society. According to her, the banking system "instability" currently seen in Ukraine results from the fact that trust-based relations between an individual and the state are in tatters.

The meaningful discussions to address the current problems facing the banking system produced concrete results and offered concrete proposals that would lay the basis for recommendations of the parliamentary hearing. 

The National Bank, in particular, came up with a proposal to lay the legal framework for tightening control over banks' operations with related parties and imposing greater responsibility on the owners of qualifying holding and other related parties for action leading to the bank’s insolvency. In addition, in the regulator's opinion, greater protection of the rights of creditors, greater investment attractiveness of the banking sector, enhanced institutional capacity of the National Bank of Ukraine should be formalized in legislation.