The Financial Stability Council (FSC) met on 27 March 2025 to look into systemic risks the financial sector is facing. Despite rising geopolitical uncertainty, the situation in Ukraine’s economy and financial sector remains under control.
Inflation and economic developments
Inflation picked up in early 2025, but the momentum that sparked that uptick is fading away. The NBU’s recent key-policy-rate hike will help tame inflation. The January forecast has GDP growth accelerating to 3.6% in 2025 and to about 4% in the years that follow.
However, risks to inflationary and economic developments loom high, underpinned by the ongoing full-scale war. On top of that, external economic risks have risen somewhat, in part due to further geopolitical polarization and fragmentation of global trade. On the bright side, positive scenarios also may materialize, potentially driven by a faster cessation of hostilities, implementation of a large-scale plan to rebuild infrastructure, and enhanced financial support from partners. The anticipated volume of external aid disbursements will be sufficient to finance budgetary needs and maintain the sustainability of the foreign-exchange market.
Financial sector
The banks enjoy stable deposit inflows, continuing to rely primarily on hryvnia-denominated funding. The sector’s liquidity ratios are over three times the minimum required levels.
Ample funding is setting favorable conditions for all groups of banks to rapidly develop lending. The net corporate loans portfolio was up 26.5% yoy in February. Meanwhile, the role of subsidized loans to businesses has been waning.
The net retail loan portfolio is also growing at a brisk pace. The banks are competing more actively in the unsecured retail segment (card-based and cash loans). The mortgage portfolio is rising only within the framework of the state program eOselia. Updates to this program have been proposed so that the mortgage market can continue to evolve.
Loan portfolio quality is improving: the NPL ratio shrank by 6.3 pp over the year to 30.5% at the end of January. Competition between the banks for prime borrowers has helped sustain a long-lasting decline in interest rates, which remain affordable.
The banking sector is well capitalized, boasting significantly higher capital adequacy ratios than the minimum regulatory requirements. The NBU will decide on the timeline for the capital requirement enhancements after it completes its ongoing assessment of the banks’ resilience.
One of the new challenges to financial stability is the proliferation of virtual assets. Efforts to develop approaches to regulating this market were among the topics discussed at the FSC meeting. The National Securities and Stock Market Commission presented to FSC members its perspective on how the regulatory powers should be distributed between the market regulators of the future. At the same time, the FSC members agreed to research the issue in-depth by conducting a study that incorporates a regulatory model to be jointly prepared by the NBU and the NSSMC.
The following co-chairs and members of the FSC participated in the meeting: Minister of Finance of Ukraine Serhii Marchenko, NBU Governor Andriy Pyshnyy, NBU First Deputy Governor Kateryna Rozhkova, First Vice Prime Minister and Minister of Economy of Ukraine Yuliia Svyrydenko, Deputy Head of the Office of the President of Ukraine Iryna Mudra, Head of the National Securities and Stock Market Commission Ruslan Mahomedov, NBU Deputy Governor Dmytro Oliinyk, Deputy Minister of Finance of Ukraine for European Integration Yurii Drahanchuk, Managing Director of the Deposit Guarantee Fund Olha Bilai, and other top officials of institutions comprising the FSC.
The FSC was established by presidential decree in March 2015 and provides a forum for the professional discussion of systemic risks to domestic financial stability.