The National Bank of Ukraine has updated its Macroprudential Policy Strategy (the “Strategy”), which reflects the impact russia’s full-scale invasion has on Ukraine’s financial sector, new challenges for macroprudential policy, and the NBU’s approaches to responding to these new challenges.
The publication of the Strategy promotes transparency, understandability, and predictability of macroprudential policy for financial market participants, thus increasing its effectiveness in attaining the main goal of delivering financial stability in Ukraine.
In addition to risks that are usual for the financial system, today the NBU and financial institutions are facing new challenges. Therefore, in the updated Strategy, the NBU draws attention to the following aspects:
- The need to ensure business continuity during the full-scale war has become crucial for financial institutions, while operational risks may prove to be systemic.
- The government’s lending support programs launched in 2020 played a significant role during the most severe stages of the COVID-19 crisis and the first months of the full-scale war. However, in the current macroeconomic environment, the programs need to be focused on specific segments and categories of clients, where it does not impede the development of market-terms lending.
- Environmental, social, and governance (ESG) risks have a significant impact on the operations of financial institutions.
Over time, the above challenges may turn into systemic risks, which calls for an appropriate macroprudential response. When choosing the instruments and method of response, the NBU will take into account the scale of the risk, its origin, and the way different policy instruments function.
The focus of the Strategy was additionally refined, as since the Strategy’s previous update four years ago, one of the systemic risks mentioned in the previous document – rapid growth in unsecured consumer lending – has subsided. In addition, plans for the introduction and use of macroprudential instruments have been updated in the wake of the war. In particular, the introduction of capital buffers has been postponed.
The NBU is guided by the principles of independence, transparency, preventive approach, prudence/flexibility, coordination, proportionality, avoidance of regulatory arbitrage, and consideration of the national specifics of the financial system.
The updated Macroprudential Policy Strategy was approved by NBU Board Decision No. 444 dated 24 December 2024.
The first Strategy was published at the end of 2018, laying the groundwork for the implementation of a systemic macroprudential policy that aims to strengthen the resilience of the financial system. The first section of the Strategy provides a brief overview of the essence, objectives, principles, and tools of macroprudential policy. The second section is devoted to the specifics of macroprudential regulation in Ukraine. The third section describes the practicalities of implementing macroprudential policy in Ukraine. In this section, the NBU draws attention to the key risks that, if they materialize, can disrupt the normal functioning of the financial sector, as well as to the means to counter these risks. The strategy also provides an approximate list of macroprudential instruments the NBU is using – or will use later – in order to ensure financial stability.