The National Bank of Ukraine (NBU) has added a systemic risk buffer to the list of capital buffers that should be generated by banks to increase their capability to withstand risks during periods of financial and economic instability, the press service of the regulator has said.
The changes were approved by NBU Board Resolution No. 131 dated December 3, 2021 on approving amendments to the instruction on the procedure for regulating banks in Ukraine, and entered into force on December 7, 2021.
To control the generation of capital buffers by banks in the approved amount, the term “combined capital buffer” has been introduced, defined as the aggregate amount of capital buffers set for a bank.
According to the updated instructions, banks independently generate a combined capital buffer. The regulator sets the size of the systemic risk buffer in the range of 0-3% of the bank’s total risk. The decision on the start date and the procedure for the generation of the systemic risk buffer by banks, its size or increase, the schedule for the gradual achievement of the approved size (if necessary) is made by the NBU Board, and shall contain information on the grounds and purposes of introducing/increasing the size of this buffer, a list of banks that are obliged to generate it and/or the criteria on the basis of which such banks are determined.
The press service recalled that in 2020, the NBU postponed the generation of conservation buffers and systemic importance buffers by banks due to the introduction of quarantine and restrictive measures related to the spread of the COVID-19 infection.
The National Bank will notify banks about the resumption of the formation of these buffers in the first quarter of 2022. The NBU will inform the date of the start of the formation of capital buffers and their values in advance, which will allow banks to take measures to comply with the requirements, the NBU said.
The result of a more coordinated work on the return of funds from failed banks may be an increase in the partial voluntary repayment of debts by former owners, First Deputy Governor of the National Bank of Ukraine Kateryna Rozhkova has said.
“What can happen and what we would like – perhaps the owners to some extent will be ready to voluntarily close debts,” she told Interfax-Ukraine, answering the question about the implementation of the paragraph of the Memorandum with the IMF on strengthening work on the return of assets of failed banks.
Rozhkova recalled that a working group was created at the government level, headed by the Prime Minister, which includes the governor of the National Bank and the head of the Deposit Guarantee Fund, which is engaged in boosting work on the return of assets.
“In fact, you don’t need to invent anything new, because PrivatBank has already passed a certain path: there are courts in Western jurisdictions, tools for how to do this – through courts in Ukraine or abroad,” the representative of the National Bank said.
Rozhkova said that all the documents that the NBU had, confirming certain abuses, were transferred to law enforcement agencies. According to her, the Deposit Guarantee Fund conducts due diligence with the involvement of audit companies to determine where and how assets were withdrawn for each of the banks, according to the schedule. Further, claims are being prepared, which should be transferred either to courts, or to law enforcement agencies here, or to other jurisdictions.
“I will also say an unpopular thing, but it is true: those banks that left the market have assets that they lost in Donetsk and Crimea [in the occupied territories]. And this was not a withdrawal of funds. There are assets that have ceased to be serviced when the hryvnia sharply devalued. Collaterals depreciated, loans increased. It cannot be said that the entire volume is the fault of shareholders. It is necessary to calculate, prove, divide, and where it is provable, move the traditional way,” Rozhkova said.
As reported, according to a memorandum with the IMF, by the end of December this year, the Prosecutor General’s Office is to publish a semi-annual report on the outcomes of criminal proceedings against former bank owners, managers and other related parties in each resolved bank since the beginning of 2014, with aggregate data on the number of persons investigated, tried, and convicted as well as the amount of fines and damage recovered.
The next benchmark in this area is the publication of a asset recovery strategy paper and an action plan for the return of assets of failed banks by the end of February 2022.
The National Bank of Ukraine (NBU) on September 9 made a decision to revoke the banking license and liquidate Bank Zemelny Capital (Dnipro) belonged to former Coal Industry Minister Viktor Topolov (94.4% of shares), the regulator has said on its website.
“At the suggestion of the Deposit Guarantee Fund, the NBU made decision No. 469-rsh dated September 9, 2021 to revoke the banking license and liquidate Bank Zemelny Capital,” the NBU said.
As reported, the NBU on August 11 classified Bank Zemelny Capital as insolvent due to the failure to meet its obligations to depositors and other creditors due to insufficient funds within the term established by the agreement or determined by the legislation of Ukraine.
Bank Zemelny Capital was founded in 1994. According to the NBU data as of January 1, 2021, the owner of the bank’s substantial participation is former Minister of the Coal Industry Viktor Topolov (94.4% of the shares).
According to the NBU, as of June 1, 2021, Bank Zemelny Capital ranked 63rd in terms of total assets (UAH 909.983 million) among 73 banks operating in the country.
The international reserves of Ukraine as of September 1, 2021, according to preliminary data, amounted to $31.614 billion (in equivalent), which is 9.2% more than at the beginning of August this year ($28.951 billion) according to the data of the National Bank of Ukraine (NBU).
“As of September 1, 2021, Ukraine’s international reserves, according to preliminary data, amounted to $31.614 billion (in equivalent). This volume of reserves is a record over the past nine years … In August, the reserves increased by 9.2% due to, first of all, the receipt of funds in the amount of 1.928 billion special drawing rights (SDR) within the general allocation from the IMF,” the report says.
As the National Bank notes, the dynamics of the August reserves was affected by the operations of managing the state debt: the total volume of payments for servicing and repaying the state and state-guaranteed debt in foreign currency amounted to $ 188 million (in equivalent).
It is specified that $ 33.7 million was spent on servicing and redeeming external bonds, $ 18.2 million – on servicing and redeeming government domestic loan bonds, the rest – for fulfilling other government obligations in foreign currency.
At the same time, in August, foreign exchange receipts in favor of the government amounted to $ 8.8 million (in equivalent).
The dynamics of reserves was also influenced by the operations of the NBU in the interbank market. In particular, the central bank replenished its reserves by $ 348.3 million due to the fact that for most of August supply on the market prevailed over demand.
In addition, the dynamics of the indicator was influenced by the revaluation of financial instruments: last month their value decreased by $ 31.6 million (in equivalent), according to the National Bank.
The regulator noted as of September 1, 2021 the volume of international reserves covers 4.4 months of future imports – this is enough to fulfill the obligations of Ukraine, the current operations of the government and the NBU.
In addition, the NBU clarified that Ukraine’s net international reserves in August increased by $ 2.836 billion, or 15.3%, to $ 21.364 billion.
The National Bank of Ukraine (NBU) in the updated Inflation Report published on the website again worsened the estimate of the growth of Ukraine’s gross domestic product (GDP) in the second quarter of 2021 (hereinafter compared to the same period in 2020), to 7.5% from 8.7% in April and from 11.3% in the January report.
The negative impact of last year’s low harvest on exports, the food industry and agriculture (in particular, livestock farming due to a decrease in profitability as a result of higher prices for feed) remained. The negative conditions influenced agriculture and a later start of the harvesting (one week later), the National Bank said, explaining the deterioration of the assessment.
The NBU also revised its forecast for GDP dynamics in the second half of this year. If in April he expected economic growth in the third and fourth quarters, respectively, by 4.2% and 3.6%, now – by 3.6% and 5.8%.
“The key risks to the macroeconomic forecast are the imposition of stricter quarantine measures in Ukraine and globally, and a longer and more pronounced than expected surge in global inflation,” the National Bank said.
As reported, in general, the NBU confirmed the forecast for GDP growth for 2021 at 3.8% and for 2022-2023 at 4%.
According to the report, the central bank expects the economy to expand by 6.7% in the first and second quarters of next year, slowing to 2.8% in the third and to 1% in the fourth quarters.
Travel services imports, which fell sharply in 2020 due to the pandemic, will grow by almost 1.5 times this year, to almost $7 billion, Deputy Governor of the National Bank of Ukraine (NBU) Yuriy Heletiy said in an interview with Interfax-Ukraine.
“Travel services imports will not reach pre-crisis levels this year, but there will be an increase compared to the last year, when international travel was restricted due to lockdowns. We forecast an increase this year to nearly $7 billion from $4.7 billion in 2020, and it will exceed the pre-crisis level in the next year,” he said.
Earlier, the National Bank estimated travel services imports in 2019 at $7.5 billion.
At the same time, Heletiy said that the growth of remittances of labor migrants continues, which did not stop even the last year, and following the five months of this year amounted to 11%.
“According to our forecast, remittances of labor migrants this year will increase by 11%, to about $13.3 billion due to the economic recovery of the countries of destination of labor migrants and simplification of border crossing conditions due to the acceleration of vaccination rates,” the NBU Deputy Governor said.
