The National Bank of Ukraine (NBU) has published the annual report on the activities of the Financial Stability Council covering the period from August 2018 to July 2019.
The delay in cooperation with the IMF remained a key threat to Ukraine’s financial stability in the period noted above. The Council members have on multiple occasions stressed the need to preserve the active cooperation with the IMF. This cooperation is the basis for the continuation of structural reforms and refinancing of Ukraine’s external debt at lower rates.
The Council also focused on other problematic issues causing systematic risks in Ukraine. These issues are mainly related to the settlement of bad debts due from state-owned banks, prevention of potential adverse developments with PrivatBank, improvement of financial position of the Deposit Guarantee Fund of Ukraine (DGF).
Therefore, in the reporting year, the Council:
- approved and sanctioned the publication of the Recommendations (principles) for the State-Owned Banks on Treating Nonperforming Loans (NPLs). The Recommendations were published on the NBU’s website at the beginning of January 2019. They identify basic prerequisites that should ensure the fairness and transparency of the restructuring process, as well as the protection of interests of the state.
- discussed possible ways to resolve the debt of state-owned monopolies to state-owned banks and recognized the need to reform the medium-term strategy for the state-owned monopolies.
- supported the need for further changes to the DGF system, including the implementation of the EU Directive on expanding the list of participants of the deposit guarantee system, the Early Warning System (EWS), the procedure for removing the banks from the market, and financing the DGF. Jointly with the IMF and Word Bank, the task force created by the Financial Stability Council to implement measures for the resolution of the DGF’s insolvency will work out approaches that will have ensured the DGF’s solvency by the end of 2019.
- supported the establishment of a system for submission of financial statements in iXBRL format. The updated procedure for the compilation and submission of financial reporting will simplify the conduct of business for Ukrainian companies. The openness of financial information about the activity of Ukrainian enterprises will improve the investment climate and capital market development.
In addition, in April, the Council conducted an extraordinary meeting dedicated to litigation with PrivatBank. At the meeting, the participants discussed possible ways and scenarios to protect state interests in courts and agreed to keep communicating with the public and international financial institutions about the course of PrivatBank-related litigation, make the process as transparent as possible, analyze the possibility of removing the bank secrecy label from the information related to NPLs, and update the action plan to protect state interests in future lawsuits.
For reference: The Financial Stability Council was established by a Presidential Decree in March 2015. The Council comprises the Governor of the National Bank of Ukraine, the Minister of Finance of Ukraine (co-chairs of the Council), Head of the National Securities and Stock Market Commission, Head of the National Financial Services Commission, Managing Director of the Deposit Guarantee Fund, Deputy Governor of the National Bank of Ukraine, and Deputy Minister of Finance of Ukraine. The Council provides a forum for professional discussion of risks posing a threat to the country’s financial stability.