Discussing the strategy of rebuilding Ukraine’s banking system at yesterday’s regular bankers’ conference at the National Bank of Ukraine, Governor of the National Bank of Ukraine Valeria Gontareva said that this process includes three phases: a clean-up, reset and sustained development.

‘The first phase of reforming the banking sector –a clean-up– will be completed by 30 June 2015. By that time, the 35 largest banks which passed a stress test in 2014 must be fully capitalized. In fact, the banking system will be virtually cleansed of the banks exposed to systemic risks. In addition, at that time we could launch a reset of the banking system – the second phase of our reform. We have already prepared all required regulatory acts and intensified the banking supervision and financial monitoring. We will implement a ‘permanent supervision’ procedure to ensure that the situation in the banking system which our team have inherited in the summer of 2014 will never happen again’, Valeria Gontareva stressed.

‘Our task’, the Governor of the National Bank of Ukraine continued, ‘is to create conditions on banking market and at the National Bank in which all reforms that we implement will be irreversible. We need at least a year to reset the banking system. We’ll begin with the gradual lifting of restrictions on individual deposit market and then on foreign exchange market. We’ll start lowering the refinancing rate as soon as we curb inflation. The level of corporate governance and risk management at banks will be strengthened. This way, we will work on restoring public confidence in Ukraine’s banking system’.

And the third, most important phase of rebuilding is sustained development of the banking system in all areas. ‘As a banking regulator, we have to be ready for this. The National Bank will not only declare inflation indicators and set the monetary policy principles but implement these principles using inflation targeting mechanisms and flexible exchange rate. Our goal is to bring inflation down to 5% over the next 3-5 years and foster economic growth in the country by supplying the economy with affordable resources’, Mrs. Gontareva emphasized.

First Deputy Governor Oleksandr Pysaruk added that during their visit to Washington for an annual Spring Meeting of the IMF and the World Bank Group, they were pleased to hear praises from our foreign creditors regarding the process of cleaning up Ukraine’s banking system. ‘These were not just the words of praise but what will influence the future decisions regarding approval of new tranches, financial assistance and our cooperation in general’, Mr. Pysaruk said.