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Confidence in Financial Sector Resilience to High-Impact Adverse Events Is Strong despite High Risks – Systemic Risk Survey

Confidence in Financial Sector Resilience to High-Impact Adverse Events Is Strong despite High Risks – Systemic Risk Survey

Financial institutions’ managers slightly improved their assessments of the Ukrainian financial sector’s current performance. This is according to the November 2022 Systemic Risk Survey.

Three quarters of top managers described the financial sector’s current standing as satisfactory. At the same time, the share of those who rated the sector’s conditions as bad or very bad was down 12 pp from May, to 17%.

The share of respondents who perceived past and future changes in the financial sector as negative shrank significantly. Specifically, the proportion of financial institutions that reported a worsening of financial sector performance over the previous six months declined by 17 pp compared to May, to 72%. The share of respondents expecting worse financial sector conditions in the next six months almost halved, to 50% of respondents.

Most respondents continued to rate the overall level of financial sector risk as high or very high. However, the share of “very high” assessments decreased from the May survey, while that of neutral assessments rose.

Assessments of the financial sector’s resilience to high-impact adverse events improved compared to May. As before, almost half of respondents evaluated it as average. By contrast, the share of respondents who rated the sector’s resilience as low or very low shrank notably. As a result, the aggregate balance of responses came in at an all-time high since the surveys began in May 2018.

Top managers said, as they did six months ago, that the war with russia was the source of the highest risk. Macroeconomic factors – inflation and exchange rate levels – also remained among the biggest sources of risk. The risk associated with the business activity factor increased significantly over the past six months, as did the risk of fraud and cyber threats. Meanwhile, corruption in the activities of law enforcement authorities and courts, a factor that had led the way since 2018, barely made it to the top ten sources of risk.

The risk appetite of financial institutions was little changed over the past half a year.

For reference

This survey was carried out between 10 November and 24 November 2022. Executives from 22 banks, 11 insurance companies, and three investment firms took part in this survey. Financial institutions under special economic measures and other restrictions (sanctions) have not been surveyed. Summary results were calculated by giving equal weight to each survey response, regardless of the size of the bank/company, or its market share.

Conducted by the NBU twice a year, the Systemic Risk Survey looks into how the largest banks and nonbank financial institutions perceive existing and potential risks to the financial sector. The poll reflects how financial institutions’ top management assess the financial sector’s performance over the past six months and what they expect for the next six months.

The results presented in the survey are based on respondents’ opinions and do not necessarily reflect the NBU’s assessment of financial system risks.

The next Systemic Risk Survey will be published in May 2023.


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