A regular meeting of the Financial Stability Council, chaired by the Governor of the National Bank of Ukraine Valeria Gontareva with the participation of Minister of Finance of Ukraine Oleksandr Danyliuk, Managing Director of the Deposit Guarantee Fund Kostyantyn Vorushylin and other senior executives of these institutions, took place on 4 May 2017.
The meeting participants pointed to an optimistic global economic outlook and favorable price developments in global commodity markets. Since the beginning of the year, FX risks have abated significantly, fiscal policy has remained prudent and inflation developments are in line with the NBU’s projections. However, in Q1 2017, domestic economic conditions deteriorated slightly due to a forced blockade of temporarily occupied territories and the suspension of trade with the non-government-controlled areas. The adverse effect of the blockade was felt immediately and took a toll on the economic performance indicators. Going forward, the adverse impact is expected to weigh on output growth and the balance of payments by the end of 2017.
The Financial Stability Council underlined the importance of the timely implementation of reforms agreed under the IMF’s EFF program. Delays in implementing the program may pose significant risks to the macrofinancial stability in the medium term.
The Financial Stability Council expects that the process of reforming the public banking sector to gain momentum in the upcoming months. In particular, the Financial Stability Council expects the passage of a law governing the selection process of the independent members of the SOB’s supervisory boards. Also, the strategic principles for reforming the public banking sector will be finalized. The Council members pointed out that intense competition among state-owned banks without a clear development strategy in place could create additional financial risks.
The Financial Stability Council was established by the Presidential Decree in March 2015. The Board comprises the Governor of the National Bank of Ukraine, the Minister of Finance of Ukraine (co-chairs of the Board), Head of the National Securities and Stock Market Commission, Head of the National Financial Services Commission, Managing Director of the Deposit Guarantee Fund, First 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. The next meeting has been scheduled for end-July 2017.