As follow up to the diagnostic studies of the top 20 largest banks conducted by the National Bank of Ukraine in 2015, as of 1 September 2016, banks increased capital levels by a total of UAH 108 billion as part of the implementation of recapitalization programs.
Banks may implement recapitalization programs by either increasing capital levels or taking measures to reduce credit risks. These measures, among other things, may include demanding banks increase the extra collateral they pledge against risky loans, enforcement of collateral for non-performing loans, as well as debt collection efforts targeting borrowers, which are aimed at reducing nonperforming loans. These measures had a positive effect on the capital levels of banks, enabling banks to raise their capital by a total of UAH 30.4 billion. As of 1 September 2016, a total of UAH 78 billion was injected into banks to enable them to boost their capital.
“The increase in the capital levels of Ukraine’s largest banks proves the efficiency of the NBU’s strategy for reforming the banking sector, which gradually moves from the phases of the clean-up and reset to the phase of sustainable development. The recapitalization of banks that suffered heavy losses due to the deterioration in the quality of their loan portfolio constitute a necessary prerequisite for the stabilization of the banking sector. The financial support provided to banks by shareholders contributes to enhancing confidence in banks on the part of their depositors and creditors,” said NBU Deputy Governor Ms Kateryna Rozhkova.
Four out of the top 20 largest banks for which diagnostic studies were conducted by the requlator did not require additional capital. Another five banks have fulfilled the prescribed recapitalization programs well ahead of schedule. Two of the banks that were tested in the diagnostics exercises (Fidobank PJSC and CB KHRESCHATYK PJSC) have been withdrawn from the market, while five more banks have implemented this year’s recapitalization programs and are set to fulfil some of their commitments by 2018. Another four banks remain on track with the three-year phased schedule and are currently seeking approval from the NBU for credit risk mitigation measures. It should be noted that all the top 20 largest banks that were tested in 2015 have approved recapitalization plans and are required to implement all the measures prescribed by these plans. In particular, all the top 20 largest banks are required achieve a regulatory capital ratio of at least 5% by the end of September 2016.
The NBU plans to complete diagnostic studies and approve recapitalization plans by 2017. By the end of June 2017, the NBU will conduct a comprehensive review to assess capital needs and viability of the remaining banks.
As a side note, the diagnostic studies of the top 20 largest banks were conducted by the NBU in 2015 based on data as of 1 April 2015.