Based on the results of last year's stress tests carried out within the framework of the IMF Stand-By Arrangement and the Financial Sector Development Project supported by the World Bank, banks have successfully carried through their capitalization plans, thus enhancing the resilience of the banking system and the protection of bank depositors’ and creditors’ interests.     

Last year the National Bank of Ukraine conducted diagnostic studies of the 34 largest banks (by the size of assets). The stress tests included carrying out an asset quality review and an assessment of current and forward-looking solvency in order to determine the required amount of capital increase for banks.

The findings of the diagnostic studies have revealed the need for 18 banks to take some measures aimed at ensuring that the regulatory capital adequacy requirement is met. The banks were required to address additional capital needs by July 1, 2015

Five out of the 18 banks have failed to withstand a deterioration in the economic setting, run out of liquidity and have been declared insolvent in the course of 2014–2015. 

The remaining 13 banks have successfully executed their business plans devised based on diagnostic study results and in line with commitments undertaken by banks to take measures to this effect within a set timeframe.  In particular, with a slew of measures put in place, banks were able to increase the authorized capital, raise funds  on the terms of subordinated debt to increase  Tier 1 capital, receive  irrevocable financial assistance, and reduce assets and other sources.  

The diagnostic studies were carried out by independent audit firms in accordance with the requirements set by the regulator. 

As a side note, the diagnostic exercises of the 20 next largest banks are currently being conducted within the framework of the the IMF's Extended Fund Facility Arrangement with Ukraine (Extended Fund Facility Arrangement, EFF). The diagnostic exercises are carried out to identify losses incurred by banks due to the conflict in the east of Ukraine and the downgraded economic outlook.  An asset quality review will be carried out and the adequacy of provision coverage of nonperforming loans and their real value will be assessed as part of the diagnostic exercises. All loans to bank related parties will be reviewed. The diagnostic exercises will result in identifying banks' additional capital needs. Should the exercise find insolvency in certain banks, these banks will be required to increase their capital.