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Financial Institutions’ CEOs Believe Sector Is in Best Shape in Three Years – Systemic Risk Survey

Financial Institutions’ CEOs Believe Sector Is in Best Shape in Three Years – Systemic Risk Survey

Respondents rated the current standing of the Ukrainian financial sector the best since the start of the survey in May 2018. Most top managers said they did not expect negative changes in the next six months. Meanwhile, one-third of respondents said the financial sector’s performance would continue to improve. This is according to the May 2021 Systemic Risk Survey.

The CEOs of Ukraine’s largest banks and nonbank financial institutions in May 2021 significantly raised their estimates of the shape the financial sector was in. The positive balance of responses (+22%) is the highest since three years ago, when the Systemic Risk Surveys of the financial sector began.

One in three top managers noted improvements in financial sector performance over the past six months. At the same time, only 6% of respondents rated its status as below satisfactory.

Twenty percent of respondents rated the financial sector’s resilience to high-impact adverse events as high or very high, compared to 9% only half a year ago.

Respondents were optimistic in estimating the financial sector’s prospects for the next six months. In particular, 33% of respondents expected improvements. In contrast, the share of respondents having negative expectations has shrunk to just 6%, one-eighth of its previous level.

The heads of financial institutions continued to cite corruption and the performance of law enforcement authorities and the judicial system as the main source of risk. The risk of Russia’s aggression in the east of Ukraine escalating increased substantially. The improved projections, primarily related to economic risks, reflect the Ukrainian economy’s gradual recovery. This has been the second consecutive survey to highlight threats to cooperation with international financial institutions as a major risk.

The overall risk appetite of financial institutions has remained practically unchanged over the past six months, 69% of respondents said.

The next Systemic Risk Survey will be published in November 2021.

For reference

This survey was carried out from 12 May through 25 May 2021. Executives from 22 banks, twelve insurance companies, and two investment firms took part in this survey. Sanctioned financial institutions have not been surveyed. Summary statistics were calculated by giving equal weight to each survey response.

The Systemic Risk Survey, which is conducted twice a year, aims to study how the largest banks and nonbank financial institutions perceive current and potential risks to the financial sector. The report shows how top managers of financial institutions assess the condition of the financial sector over the past six months and what they expect in the next six months.

The results presented in the survey are based on respondents’ opinions and do not necessarily reflect the NBU’s views.

 

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