The Board of the National Bank of Ukraine has approved the concept of resilience assessment of the banks and the banking system in 2025 (hereinafter referred to as the “Concept”). Following a three-year break, the resilience assessment of the banks and the banking system will take place under standard procedure whereby external auditors make an asset quality review (AQR) and an adverse scenario is applied within the stress-testing framework.
As per the Concept, the resilience assessment will occur in three stages:
- Stage I. Asset Quality Review. The AQR is mandatory for all of the banks and is carried out by independent auditors. It involves verifying the quality of a core sample of assets and the eligibility of collateral that is pledged against them, in line with the NBU’s credit risk assessment requirements. If upon testing the core sample the auditors find a significant number of errors in the credit risk assessment (that exceed thresholds), the auditors will do an in-depth review of an expanded sample.
- Stage II. Extrapolation. This phase extrapolates the results of the AQR’s in-depth review of assets. The NBU carries out Stage II only for the banks whose assets underwent the in-depth review.
- Stage III. Stress Testing. The NBU conducts this stage for the baseline scenario and the adverse one, using the banks’ financial statements and a forecast horizon of three years.
Stage III applies to the largest banks by volume of retail deposits, risk-weighted assets, and retail loans, as well as the banks that the 2023 resilience assessment showed were in need of capitalization. Based on early estimates, this approach will involve stress testing about 20 banks and provide a sample of more than 90% of the banking system’s net assets. The resilience assessment will use the data available on 1 January 2025.
“Resilience assessment is a conventional tool for analyzing the banking sector and its risks that is used by most regulators around the globe,” said NBU Governor Andriy Pyshnyy. “The banks’ adjustment to operating amid full-scale war and their fairly strong financial standing make it possible to return to business-as-usual yearly resilience assessments. Ultimately, this practice should reveal potential weak links and, if necessary, shore them up so that the banking system can continue to successfully meet existing and potential challenges.”
Tentative timeline for the 2025 resilience assessment:
- December 2024 – approval of the Terms of Reference for the resilience assessment and of the list of banks to undergo stress testing
- 30 April 2025 – completion of Stage I and submission by auditors of an AQR report to the NBU
- 10 July 2025 – approval by the NBU of assessment results for Stage II banks, and instructing these banks to prepare programs where necessary
- 10 August 2025 – approval by the NBU of assessment results for Stage III banks, and requiring that these banks draft programs if need be
- 1 August 2025 – reflection of AQR results in the banks’ reporting
- 15 August 2025 – submission by the banks to the NBU of programs based on Stage II results
- 15 September 2025 – submission by the banks to the NBU of programs based on Stage III results
- 31 December 2025 – implementation by the banks of NBU-approved programs, and publication of the 2025 resilience assessment results.
Regular resilience assessments of Ukraine’s banks have been carried out annually since 2018, except for 2020 and 2022, when the Covid-19 crisis hit and russia launched the full-scale invasion. After the hiatus, the assessments resumed in 2023, based on data available on 1 April, but this time a number of specific features were added. The 2023 assessment showed that most banks in Ukraine had sufficient capital and that the banking system as a whole had a high margin of safety. Some of the banks have since been implementing capitalization/restructuring programs greenlighted by the NBU. No resilience assessment has been carried out in 2024, as the previous results remained relevant.