Biznews (#05 May 2015)

Banking & Finance

National Bank of Ukraine launches bank survey

Within the new IMF lending program under the Extended Fund Facility (clause 17 of the Memorandum of Economic and Financial Policies) by 1 August 2015 and 1 October 2015, the performance of 10 banks with largest assets and 10 banks that follow will be tested.

In the first phase, the National Bank of Ukraine will assess the validity of quality assessment for active operations, adequacy of reserves, and credibility of their balance value. The sample of loans to businesses will include all loans that are greater than or equal to UAH 200 million, or 5% of the regulatory capital (excluding reserves), other loans up to 65% of the loan portfolio, and all loans to bank-related persons that are greater or equal to 1% of the regulatory capital. The examination of the quality of loans will be followed by calculation of their capital adequacy.

The second phase involves stress testing by the end of 2017, when banks’ need for capital will be assessed due to the deteriorating economic situation.

The survey’s results will help to determine the sum required for capitalization of the banks and their capitalization or restructuring of banks. If the survey detects insolvency in individual banks then they will need to ensure positive capital values by the end of August and by the end of October 2015.

According to the requirements of the Memorandum of Economic and Financial Policies, the National Bank of Ukraine will assess the risks incurred in the course of banks’ active operations with their related persons. After the new legislation on strengthening accountability of the banks’ related persons came into effect on 8 March 2015, the banks are obliged to identify such persons on the basis of the criteria and standards defined by the regulator.

Based on the NBU’s technical specifications, which have been coordinated with the IMF and the World Bank, the auditing of operations with related parties will be performed by a Big Four auditing firm.

On the basis of this audit banks will be required to provide their action plans to reduce  excessive operations with their related persons within a specified term.

 

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