For the first time in four years: National Bank to conduct stress tests for banks

After a four-year hiatus, the National Bank of Ukraine  is resuming the assessment of the banking system's stability, which will start at the end of 2024. The test should cover more than 90% of banks' net assets and will determine the need for capitalization or restructuring of individual institutions, UNN reports citing the NBU.

"After a four-year break, the assessment of the stability of banks and the banking system will be carried out according to the standard procedure, with the involvement of external auditors in assessing asset quality and the use of an unfavorable scenario as part of stress testing," the NBU said.

The assessment will include three key stages:

- verification of asset quality by independent auditors,

- extrapolation of the results obtained,

- stress testing of the largest banks under baseline and unfavorable scenarios.

The third stage will cover banks with the highest levels of retail deposits, risk-weighted assets, and retail loans, as well as those that needed capitalization based on the results of the 2023 resilience assessment. This will cover more than 90% of the banking system's net assets.

The sustainability assessment will be conducted as of January 1, 2025.

According to the schedule, in December 2024, the NBU will approve the terms of reference and determine the list of banks for stress testing.

By the end of April 2025, the auditors will complete the asset quality review, and by August 10, the NBU will approve the assessment results. If necessary, banks will be required to prepare capitalization or restructuring programs.

Recall 

In 2024, Ukrainian banks earned UAH 40.5 billion, up 19% year-on-year, despite higher taxation. During the first quarter, only 8 out of 63 banks showed losses.