December 19, 2016 - The deep political, economic and security crisis since 2014 has put the Ukrainian banking sector under severe stress. The authorities have responded with significant reforms to support financial sector stability, strengthen supervision, as well as to enhance the bank resolution legal framework, including for systemic banks. At the same time, a quality review of more than 75 percent of banking sector assets was conducted. As a result of the comprehensive reforms, more than 80 banks out of the 180 were sent to the Deposit Guarantee Fund for resolution.
The asset quality review revealed a significant capital shortfall in PrivatBank, the largest systemic bank in Ukraine. While the recapitalization and restructuring plan for PrivatBank was adopted by the National Bank, PrivatBank owners were not able to implement it in due course. Thus, on December 18, as per the new legal framework for the resolution of systemic banks, the Cabinet of Ministers of Ukraine approved a decision on state participation in the recapitalization of PrivatBank, by transferring full ownership to the State. The World Bank believes that this decision is an important step to preserve Ukraine’s financial stability, increase confidence in the banking system and provide equal treatment for all banks requiring recapitalization.
Going forward, the World Bank considers it critically important to put in place professional management and an independent supervisory board to effectively restructure PrivatBank, safeguard depositors, and minimize costs to taxpayers. The World Bank welcomes the bold step taken by the Central Bank and the Government of Ukraine in securing the financial stability of the banking system in the country, and together with other development partners, will continue supporting Ukraine in its efforts to build strong institutions and advance the financial sector reforms.
