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Financial Stability Report

December 2021

Financial Stability Report

The latest Financial Stability Report features lending resumption, plans for further implementation of regulatory changes, and risks to the banking sector.

Combined, the escalation of the conflict with Russia, high energy prices, and the spread of the new coronavirus variant have lowered expectations of economic development. Risk premiums on Ukrainian assets have risen, which limits the country’s access to global financial markets, making it important to continue the cooperation with the IMF. At the same time, the banking system receives little funding from foreign markets, which moderates the direct effects. The economy is resilient enough to withstand the said risks, but its growth is slower than expected. More investment is needed to boost economic growth. 

Banks are profit-making, well-capitalized, and liquid – and thus ready to lend actively. Foreign investors’ interest in Ukraine’s banking sector has increased. Demand for retail and corporate loans have been fueled by higher incomes, lower interest rates, and state support programs: the loan portfolio has been growing rapidly. The corporate loan portfolio is improving, resulting in a significant decrease in banks’ provisions. 

Except for liquidity risk, financial sector risks either declined or remained unchanged (according to the risk map).


Bank funding is sufficient to continue lending. However, the financial institutions were interested in extending deposit maturities, so they started raising their rates in H2. The increase in the NBU’s key policy rate was another reason for the growth in interest rates. The continued decline in loan rates is narrowing banks’ net interest margins, but their incomes are on the rise due to the rapid growth in loan portfolios. 

Considering banks’ profitability and available capital cushions, there is no point in delaying the implementation of new regulatory changes. Banks will be required to build capital conservation buffers and systemic importance buffers in full by 1 January 2024.  

As is usual, the report makes recommendations for the state authorities, banks, and nonbank financial institutions, which are aimed at enhancing the stability of the financial system and mitigating current and future risks.

The report is primarily intended for financial market participants, state authorities, and everybody interested in Ukraine’s financial stability issues. The analysis and conclusions it provides will help economic agents and media representatives better understand current risks, their potential impact on financial stability, as well as the nature and intents of the regulator’s measures.

This report improves the transparency and predictability of macroprudential policy, instills greater public confidence in the policy, and helps the NBU manage systemic risks.