On 24 March 2016, the Higher Expert Council at the Council of the National Bank of Ukraine held a meeting to discuss the Strategy of reforming state-owned banks operating in Ukraine.
In opening the meeting, Chairman of the NBU Council Mr Bohdan Danylyshyn said: “Today we are review a state policy regarding the governance of state-owned banks. The public sector in the banking system is extremely large. The four state-owned banks account for 60% of household deposits that are used to provide only 44% of loans, while in the entire banking system this figure reaches 67%. Therefore, this calls for the need for a new strategy of reforming state-owned banks that should aim to:
- transform state-owned banks into economically independent financial institutions that will not require budget support in the medium term;
- develop corporate governance in state-owned banks to minimize the potential conflict of interest between the bank management and representatives of the owner – the state;
- prevent corruption at state-owned banks;
- encourage healthy competition between state-owned and private banks to comply with antimonopoly laws and regulations.
On the other hand, we have take into account international best practices governing the operation of state-owned banks. State-owned banks should become drivers of structural changes in supporting high-tech manufacturing and infrastructure projects, the development of SMEs and human resource development”.
The meeting discussed the issues related to the Development Strategy for State-Owned Banks drafted proposals for the Government of Ukraine and the NBU Board in the following areas:
Strategic objectives of state-owned banks:
- attain competitive advantages;
- optimize the network of state-owned banks;
- consolidate the strategic objectives and tasks facing the four banks to restore lending to the economy.
Preventing the possibility of abuse of the monopolistic position of state-owned banks:
- deepening of specialization of state-owned banks;
- preparations for mergers for banks that cannot be nationalized;
- privatization of state-owned banks should be carried out in a cost efficient manner for the state.
Reporting of state-owned banks should meet the transparency requirements - stress testing of banks should be carried out every six months.
Assets and Liabilities Management:
- setting a limit on large exposures and credit risk concentration to large borrowers;
- coordinated fundraising policy;
- syndicated lending to the economy;
- a unified approach to toxic asset management.
Capitalization/privatization - centralized development of instruments for raising additional capital (subordinated debt, DRs, IPO, etc.)
Corporate governance:
- Modifying the procedure for forming Supervisory Boards:
- depoliticisation;
- competitive selection procedure to appoint independent experts;
- the formation of the bank's management bodies should meet the transparency requirements.
- Establishment of committees at the Supervisory Boards:
- strategy and development;
- audit and risks;
- appointments and remuneration.
The meeting was held with the participation of Chairman of the Council Mr Danylyshyn, NBU Deputy Governor Ms Kateryna Rozhkova, representatives of the Ministry of Finance of Ukraine, Ukrainian MPs, representatives of the National Security and Defense Council of Ukraine, heads of Banking Associations and the Banking club, as well as renowned representatives of academia and expert communities.
The proposals drafted by the Higher Expert Council will be submitted to the NBU Board, the Cabinet of Ministers of Ukraine and the Relevant Parliamentary Committee.