Purpose. Reforming Ukraine’s financial sector and maintaining financial stability.
Components:
- Supporting the authorities on bringing the banking sector supervisory system in line with international best practice standards
- Improving the system of bank rehabilitation and deposit guarantee in Ukraine
- Banking sector reforms aimed at restoring a sustainable flow of loans to the economy
- Diversifying the financial sector and developing financial infrastructure
- Diagnosing the weaknesses of the financial sector and providing recommendations for political decision-making.
Products implemented for the NBU and key events:
Strengthening the Supervisory Functions of NBFIs area:
- advisory support was provided in the implementation of the Split project
- conceptual comments and recommendations were provided to the new version of the Law of Ukraine On Insurance, adopted on 18 November 2021, as well as to the draft Law of Ukraine On Mandatory Insurance of Civil Liability of Owners of Land Vehicles
- a diagnostic study of the insurance market of Ukraine (quantitative assessment of the impact of the insurance market and development of appropriate regulatory changes) was carried out. The results were used in the preparation of the new version of the Law of Ukraine On Insurance and will be used in the development of regulations to regulate the insurance market of Ukraine
- several cycles of seminars on the implementation of IAS 17. Insurance Contracts for the NBU and participants of the insurance market of Ukraine were held;
- expert missions were conducted to strengthen regulation and supervision in the banking and insurance sectors, and recommendations were provided for further improvement
- recommendations were provided on draft regulations on insurer solvency and on the methodology for the formation of insurance technical reserves
- a meeting on the supervision of the Ukrainian insurance market was held: development of risk-based surveillance tools
- materials with examples of the content of training programs and regulation of actuaries’ activities in other countries (in particular, Austria and Slovenia) were received
- assistance was provided in developing the Concept for the Development of a War Risk Insurance System
- advisory support was provided in the development of the draft law of Ukraine On the War Risk Insurance System.
Improving the System for Resolving Bank Insolvency area:
- White Paper and draft amendments to the Law of Ukraine On Banks and Banking were developed to implement the provisions of the BRRD
- a series of webinars on BRRD implementation was held
- an expert mission was carried out on the implementation of the BRRD/DGSD, as well as on the plan for updating the draft legislative amendments for the settlement of bank insolvency (BRRD/DGSD), deposit guarantee and deposit insurance in accordance with EU directives
- seminars were held on the practical aspects of the sale of a business tool under the BRRD [the event was organized with the participation of the European Systemic Risk Board and the institution responsible for the resolution of insolvent banks (Spain) (FROB)]
- a number of discussions were held on amendments to the banking legislation and the Law of Ukraine On the Deposit Guarantee Fund (DGF)
- additional discussions were held to agree on the concept of the institutional architecture for implementing bank regulation under the BRRD, including a review of possible scenarios on the conceptual division of powers and options for cooperation between the NBU and the DGF (work is ongoing).
Bringing the Banking Sector’s Regulatory and Supervisory System in line with International Best Practices area:
- the materials were provided used in the development of the decisions of the Board of the NBU on liquidity coverage ratio (LCR), net stable financing ratio (NSFR), capital requirements to cover operational risk, requirements for the development of recovery plans, capital instrument on write-off/conversion conditions (CoCo), capital requirements to cover market risk, capital buffers (combined capital buffer), the procedure for determining the amount of regulatory capital, capital adequacy requirements for banking groups, the procedure for calculating the leverage ratio (LR) and settlement risk (SR)
- assistance has been provided in strengthening the banking regulatory framework in accordance with the requirements of Basel III and the CRD Directive / CRR Regulation (as amended), namely, improving the capital adequacy requirements for banks, in particular, expanding the list and improving approaches to assessing the components of aggregate risk exposure, including updating the approaches to weighting assets by credit risk level under the Credit Risk Standardized Approach (SA-CR), requirements for Credit Risk Mitigation (CRM), as well as the introduction of requirements for assessing Counterparty Credit Risk (CCR), Credit Valuation Adjustment Risk (CVA) and Settlement Risk, introduction of Leverage Ratio, introduction of Large Exposure Limit (LEX), and disclosure requirements (Pillar III) (work is ongoing).
NPLs area:
- a webinar "Instructions for evaluating banks' actions in terms of resolving NPLs" was held
- a round table discussion on the updated study on NPLs was held with the participation of representatives of the NBU, the Ministry of Justice of Ukraine, the Ministry of Finance of Ukraine, the Deposit Guarantee Fund, the State Property Fund of Ukraine, the Independent Association of the Banks of Ukraine, and other persons dealing with NPLs
- a seminar "NPLs settlement strategies of banks and their assessment – international experience" was held
- advisory support was provided for the development of an action plan to reduce the level of NPLs.
Sustainable Finance (Regarding Banking Regulation and Climate Risk Supervision) area:
- a memorial note on export competitiveness has been prepared, containing the section Climate Risks and Opportunities
- the policy of sustainable financing has been updated, taking into account new measures and a new schedule for its implementation, with its subsequent use in the development of the NBU's future policy on managing ESG risks (environmental, social, governance) at the financial sector level
- a questionnaire on ESG factors in the banking sector was developed and used as the basis for a survey of Ukrainian banks.
Experts from the World Bank’s Financial Sector Advisory Centre (FinSAC) in Vienna are also involved in the project. FinSAC engages in technical work to help Ukraine implement specific legislative, regulatory and institutional initiatives that strengthen the resilience and efficiency of its financial system. In addition, representatives of the NBU participate in the annual FinSAC conferences on topical issues of financial sector reform.