Ukrainian banks' work in crisis situations

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The Ukrainian economy has been significantly damaged as a result of russia's war against Ukraine. From January to September, the banking sector's profits decreased 7 times compared to the same period of the previous year. Obviously, the fighting will continue next year, which means that financial institutions must continue to find ways out of crisis situations. In this blog, let's examine what factors are affecting Ukrainian banks and how the system is coping with the challenges presented to it during the big war.


The financial institutions sector has been damaged, like any system in a country at war. But we cannot say that all is bad in the banks, because since the beginning of the year only two financial institutions were withdrawn from the market. By the beginning of October out of 67 active banks, 44 of them had received UAH 25.6 billion in income, and the remaining 23 had losses of UAH 18.2 billion. According to the NBU report, the third quarter of this year was successful for household term deposits. Due to an increase in discount rates and the addition of new conditions under which you can open a foreign currency deposit, people began to invest money in banks more actively.



Source of infographics: National Bank of Ukraine

With the profits of the last three months, banks were able to compensate for the losses of the outbreak of full-scale war. It should be noted that in addition to this, financial institutions must continue to accumulate funds in reserves, aimed at overcoming the damage caused by military action. At the same time, control over these savings remains with the National Bank. The biggest challenges to the banking sector during martial law remain hostilities, air raids and missile attacks on infrastructure, particularly energy facilities. If we take military actions out of the equation as those that banks cannot influence, we are left with situations that can be dealt with.


So far, banks have not felt the liquidity crisis, despite the fact that the population was particularly active in withdrawing funds at the beginning of the full-scale war. The situation has even had the opposite effect — financial institutions have a surplus of money, because some lending programs are not working at full capacity. And here one can understand the banks, because the conditions of loan funds have become harsher due to the fear of non-repayment. This shows that banks are taking a balanced approach to risk when it comes to maintaining operational profitability. Companies and lenders themselves are not in a hurry to get loans, because due to the difficult situation in the economy, they are also in conditions of uncertainty.


Also, important is the aspect of the functioning of banks under a blackout, and the NBU has already developed a plan for smooth operation. This includes, in particular, support for non-cash settlements and cash circulation. To ensure stability, banking institutions are equipped with additional power sources, personnel, cash equipment, and contact centers are organized. For example, state-owned PrivatBank has already transferred the work of its servers to the cloud service, installed backup power supplies and Internet access in offices and premises, as well as identified the branches, which will work in a separate mode. In addition, the National Bank has identified a number of systemically critical banks that created 760 duty branches in 22 regions of the country.


It is obvious that the banking system of Ukraine demonstrates stability and flexibility according to the situation in the current environment. Planning for all options, even the worst ones, will help to respond in time with those or other tools to potential risks. Even with a prolonged blackout, systemically important branches will provide services to the population, and comprehensive solutions will help avoid global problems in the whole industry.


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