Banks and nonbank financial institutions have improved their assessment of the financial sector. At the same time, they consider corruption and cyber threats to be major high-risk factors. This follows from the recent Systemic Risk Survey, which took place in November 2019.
In assessing the state of the financial sector, most respondents noted that during the past six months it had remained unchanged. More than 40% of respondents pointed out certain improvements in the financial market. Furthermore, the survey has shown that the number of managers who are expecting progress in the financial sector during the next six months has risen.
Top five risk factors (rated by respondents as the most significant in "very high" and "high" risk categories):
- corruption, the performance of law enforcement authorities and the judicial system
- fraud and cyber threats
- the level of protection of creditor and investor rights
- political and social conditions in Ukraine
- the status of cooperation with international financial institutions.
Interestingly, compared to the previous survey of May 2019, the assessment of risks related to fraud and cyber threats has considerably increased. More specifically, 54% of respondents previously believed this risk to be high or very high, and now this figure has risen to 70%.
Current and projected inflation, the potential bankruptcy and/or financial difficulties of financial institutions, access to funding, and exchange rate dynamics and volatility were rated by respondents as the lowest risk factors.
Respondents have also noted that during the past six months the risk exposure of their financial institutions was little changed. However, the risk appetite of one in five respondents has increased.
The next issue of the Systemic Risk Survey will be published in May 2020.
For reference
The survey was conducted from 11 through 22 November 2019. Managers from 18 banks, six insurance companies, and two investment firms took part in this survey. Financial institutions under sanctions have not been surveyed. Summary statistics were calculated by giving equal weight to each survey response.
The Systemic Risk Survey of the financial sector explores how both the biggest banks and nonbank financial institutions evaluate current and potential risks to the financial sector and is carried out twice a year by the NBU. The report shows how top managers of financial institutions assess the condition of the financial sector over the past six months and what they expect in the next six months.
The results presented in the survey are based on respondents’ opinions and do not necessarily reflect the NBU’s views.