At the public session of the Board of the National Bank of Ukraine, which took place on 15 November 2011, Deputy Governor of the National Bank of Ukraine, NBU Board Member Ihor Sorkin delivered a keynote statement on the current situation in the banking system and further intentions of the National Bank of Ukraine to enhance credibility of banks.

The following is the wording of the statement:

"Dear Board Members, dear colleagues!

I would like to turn your attention to the situation in the banking system and announce our further actions towards its development.

In the current year the banking system is demonstrating persistent positive trends: the banks’ assets have grown by 10%; the volume of lending transactions has increased. At that, loans to the economy have picked up by 15%. I would like to draw your attention to the fact that an increase was attributed to lending in the national currency.

The volume and portion of outstanding loans have declined. The banks continue to write off bad debts (loss) at the expense of reserves formed by banks. The National Bank of Ukraine has reached an agreement on this issue with the State Tax Service of Ukraine. The bed debts (loss) of UAH 21 billion have been written off so far.

I would like to draw your attention to an upward trend in the banks’ liabilities owing to both deposits from individuals (which have increased by UAH 2.2 billion over October) and deposits from legal entities.

The banks continue to repay stabilization loans granted to banks in the crisis. Over UAH 8 billion have been repaid, of which UAH 4 billion have been repaid before maturity. Out of 64 banks, having indebtedness at the beginning of the year, only 41 banks remained.

The bank “Nadra” has resumed its operation in full.

It should be noted that there was a considerable increase in the equity capital of the banking system, which reached UAH 174 billion. At that, the authorized capital has climbed to UAH 168 billion. 

It was achieved under conditions when the banks were forced to build up a substantial volume of reserves to cover risks under active transactions, which arose as a result of the financial and economic crisis.

The crisis affected the financial performance of the banking system. However, October saw a profit of half a billion hryvias.

We are aware of the fact that the National Bank of Ukraine and the banking system have to exert every effort to achieve more ambitious goals.

We are improving the legal framework in order to implement initiatives aimed at both improving regulations and enhancing efficiency of banking supervision as well as bettering banking market conditions.

The four laws have been adopted at instigation of the National Bank of Ukraine this year:

on beneficial owners, which will ensure more transparency of the banking system, enhance owners’ accountability for the bank’s financial standing, raise public awareness of banks’ activities;

supervision on consolidated basis, which will contribute to disclosure of risks and facilitate minimization of risks associated with participation in financial groups;

on protection of creditors’ rights, the long-awaited law, which will create  conditions for further lending growth, and ensure balance of interests between banks and borrowers;

on corporate governance for banks (adopted in first reading) which will facilitate improvement of the risk management system in banks, creation of the appropriate system of internal control.

We shall continue to raise the level and improve the quality of banks’ equity capital.

We intend to continue work aimed at reducing the volume of non-performing loans in the banking system.

Considerable work has been undertaken to bring approaches to reserve formation under active transactions of banks in line with the International Financial Reporting Standards (IFRS) and Basel Committee Principles. An applicable regulation will be debated at the regular Board meeting. Following its adoption, the banks will be allowed time to adjust to the new requirements.

 We shall revise the requirements regarding calculation of economic ratios in order to bring them in line with the newly adopted changes to related legislation.

Together with the Government we shall move towards resolving the issue related to further operation of banks recapitalized by the state.

In view of positive trends, which have been voiced, and tasks facing us, we are certainly aware of the fact that a professional and cautious approach is required to handle the banking system."