The National Bank of Ukraine adopts a clustering approach in the banking supervision process. The decision to this effect was taken by the Board of the National Bank of Ukraine as part of the Comprehensive Program for Financial Sector Reforms for the period up to 2020, said Director of the Banking Supervision Department Kateryna Rozhkova.
“We shift to a more risk-focused banking supervision. Presently, the supervisory units divide banks into groups by asset size.
With the new approach in place, the National Bank, for supervisory purposes, will classify banks into groups according to similarities in their business models, risk profiles, types of operations performed by them and other characteristics. Banks that are different in size but have common owners will be grouped together and fall into one supervisory cluster. Special supervision modes will be tailored for each supervisory cluster and the respective supervisory groups will be designated,” said Kateryna Rozhkova.
For instance, Group I and Group II banks will be divided into the following supervisory clusters: state-owned banks, large private banks and banks belonging to international banking groups.
For supervisory purposes, Group III and Group IV banks will be grouped based on the assessment of their business models, risk characteristics, and types of operations performed by them. However, information on which supervisory cluster a bank falls into shall be subject to the banking secrecy rules.
According to Kateryna Rozhkova, the application of supervisory clusters will enable the National Bank:
- to streamline burden on banking supervisors and curators;
- to identify the most relevant areas for analysis of bank’s operations ;
- to coordinate activities of supervisory subdivisions, financial monitoring, foreign exchange control, etc.
“The National Bank is not tasked with carrying out the resolution of failing banks. Instead, its task is to ensure the viability of the entire banking sector. We need to be aware of how banks earn profits and identify exactly which risks they are exposed to. The primary objective is to make the banking system transparent, fully capitalized and viable,” underlined Rozhkova.
In early October, the National Bank will hold a meeting with the management of Group III and Group IV banks to introduce a new model of banking supervision.