The National Bank of Ukraine (NBU) has published for the first time its assessment of banks' resilience in breakdown to individual institutions. The data can be found in the "Banking supervision" section.
Assessment of resilience comprised asset quality review (AQR) and stress tests for the largest banks. The stress tests covered banks that accounted combined for 94% of banking sector assets. These stress-tested banks had the highest average reading of two indicators, risk-weighted assets and retail deposits.
The published data indicates core and regulatory capital adequacy ratios of banks based on AQR results and under stress test. Banks must cover capital needs revealed for the first year under baseline scenario of the stress test by implementing recapitalization plans by late-March 2019. The capital needs emerging under adverse scenario over forecast horizon have to be covered by complying with restructuring plans by the end of 2019.
Additional data spread sheets show residual capital needs, which are the needs that remain after adjustment for effects of measures implemented by banks through 2018. The banks will later reflect the effect of measures taken at the end 2018, which the NBU has not assessed and verified yet.
Resilience assessment showed that banking sector is adequately capitalized; however, it has to enhance its reserves to strengthen resilience to potential crises.
Results of banks' AQR
As for reporting date in early 2018, AQR and extrapolation revealed a need for capital at 4 out of 56 banks that were not subject to stress test. Two of those banks had adequate capital by the time the diagnostics was complete. Another two banks, Globus bank and Mistobank, needed capital; but by the end of 2018, they have taken all necessary mitigating measures.
Results for stress-tested banks
13 out of 24 stress-tested banks had a total capital need of 42.1 billion hryvnia under adverse scenario (or 34.7 billion hryvnia, excluding failed VTB Bank). With regard to measures taken by banks and verified by the National Bank, the need shrank to 19.7 billion hryvnia by the end of 2018.
Out of 13 banks, 4 banks fully covered capital need under adverse scenario: the First Ukrainian International Bank, Universal Bank, 'Vostok" Bank and Sberbank.
Another three banks have completed their restructuring plans by more than a half: 'Pivdennyi', Alfa-bank, and Oschadbank.
Other banks have time until the end of 2019 to implement their restructuring plans in full.
The National Bank intends to assess the resilience of banks and banking sector further on, as well as to publish granular bank assessment results. In January, the NBU will publish the list of banks and methodology for 2019 stress tests.