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New Strategy of Financial Sector Development: Meeting Wartime Challenges to Ukraine’s Financial Sector and Supporting Economic Recovery

New Strategy of Financial Sector Development: Meeting Wartime Challenges to Ukraine’s Financial Sector and Supporting Economic Recovery

The National Bank of Ukraine, the Ministry of Finance of Ukraine, the National Securities and Stock Market Commission, and the Deposit Guarantee Fund have approved the new Strategy of Ukrainian Financial Sector Development (hereinafter the "Strategy").

The document identifies current priorities and goals in the development of the financial sector. The Strategy is focused on repelling russian aggression and restoring Ukraine. The document was developed as per the Memorandum of Economic and Financial Policies between Ukraine and the IMF.

"Joint, coordinated, and transparent actions by financial system regulators and the Deposit Guarantee Fund are vital for ensuring the country’s financial sustainability, expanding financial inclusion, accessibility, and barrier-free financial services, supporting the country as it makes its way to victory, and making transformations that will enable the Ukrainian economy to build back and develop better. Under any conditions, we want the financial sector of Ukraine to be stable, efficient, competitive, integrated into the global space, and capable of meeting challenges, developing, and contributing to the growth of the Ukrainian economy. This will be facilitated by a synergy of regulators that will unlock our development potential more effectively than would the separate actions of every authority," said NBU Governor Andriy Pyshnyy.

The strategy stipulates that the joint actions of regulators and the DGF in the financial sector will be aimed at achieving the following five strategic objectives:

  • macroeconomic stability
  • financial stability
  • financial system’s focus on the country’s recovery
  • cutting-edge financial services
  • institutional capacity of regulators and the DGF.

The measures envisaged by the Strategy are divided into short-term and medium-term ones. The short-term measures are aimed at ensuring stability and preventing the situation in the financial sector and the overall economy from deteriorating. The medium-term measures are intended to lay the groundwork for the future reconstruction and growth of the economy.

The strategy identifies the financial system’s future priorities. Those include ensuring the recovery, development, and business continuity of the financial sector, rolling back emergency prudential measures, performing bank assets diagnostics, monitoring and solving the problem of NPLs, establishing a comprehensive system of recovery and resolution of insolvent participants, and introducing a system of early response to financial institutions’ issues. Provided that macroeconomic conditions are favorable and stable, a gradual liberalization of financial markets and a return of monetary policy to the inflation targeting regime with a floating exchange rate are expected.

The Strategy outlines the need for continued technological development of financial services as a prerequisite for the further expansion of financial inclusion and cybersecurity even as the war grinds on.

The Strategy’s implementation prioritizes measures to restore financial infrastructure in liberated areas and ensure that the financial sector is barrier-free and inclusive. "The unification and consolidation of the efforts of all financial market representatives in this area will make it possible to build the most barrier-free financial system in Ukraine, with solid standards and clear-cut approaches to ensuring accessibility and inclusiveness for all, including people with disabilities," said Andriy Pyshnyy.

Special attention in the Strategy is attached to the implementation of European legislation and global best practices in financial sector regulation and supervision and financial institutions’ insolvency and resolution. The focus is on becoming part of the EU’s domestic market for financial services, as the joint unconditional priority of all parties committed to implementing the Strategy is to make progress towards EU accession.

As the war has generated high overall uncertainty, the new Strategy sets no specific deadlines. By analyzing, on a regular basis, the impact of the external environment, regulators and the DGF will refine their joint plans to achieve the Strategy’s goals and will work to implement such plans for as long as necessary. In this regard, the Strategy also establishes a short list of key indicators important in the short term during the full-scale war. The list will be updated as needed.

For reference

The Financial Stability Council, within which the regulators cooperated to hammer out the new Strategy of Ukrainian Financial Sector Development, approved it at the 19 July 2023 meeting.

The strategy has also been approved by the participating institutions’ regulations, including NBU Board Decision No. 299–D dated 29 August 2023.

The new Strategy will replace the one that was designed for the financial sector’s development until 2025. The previous strategy’s roadmap, which had been implemented for three and a half years, is 47% complete (see the link for a detailed report).

The Strategy’s preparation for publication was carried out with support from the USAID Financial Sector Reform project.

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