The National Bank of Ukraine (NBU), the National Securities and Stock Market Commission (NSSMC), the National Commission for Regulation of Financial Services Markets (NCFS), the Deposit Guarantee Fund (DGF), and the Ministry of Finance of Ukraine (hereinafter – the regulators) have approved the Strategy of Ukrainian Financial Sector Development until 2025.
The goal of the Strategy is to ensure that the reform and development of Ukraine’s financial sector moves forward in line with international best practices and that the actions envisaged by the EU-Ukraine Association Agreement and Ukraine’s other international commitments are implemented.
The Strategy outlines five major priorities of financial sector development:
- strengthening financial stability
- promoting macroeconomic development and economic growth
- developing financial markets
- expanding financial inclusion
- introducing innovations in the financial sector.
In order to further strengthen financial stability, regulators will, among other things, focus their efforts on enhancing the protection of creditors’ and investors’ rights, implementing the BEPS action plan, improving corporate governance in financial institutions, strengthening their internal control requirements, improving the deposit guarantee system and the system for resolving insolvent financial institutions, introducing risk-based supervision over nonbank financial institutions, implementing regulatory requirements in the regulation and supervision of banks and nonbank financial institutions in accordance with the EU-Ukraine Association Agreement, etc.
Macroeconomic development will be stimulated by intensifying lending to small and medium-sized businesses, in particular to farms against security of land, by removing obstacles to restarting mortgage lending, and by financing exports. Other important tasks in this area are prudent fiscal policy, development of the market for nonbank lending, enhanced coordination of actions between the Ministry of Finance and the NBU, introduction of the pillar 2 pension system and improvement of the regulation of the pillar 3 pension system, and development of the domestic market for government securities.
To develop financial markets, the regulators will work to complete the currency liberalization, to create liquid markets for financial instruments (derivatives, corporate stocks and bonds, etc.), to deregulate markets for nonbank financial services that are associated with low risks or are out of alignment with EU practices, to regulate insurance activities in line with Solvency II and IAIS principles, to ensure that insurance intermediaries are regulated, to legislate prerequisites for the development of markets for credit unions and financial leasing services, to modernize stock exchange and depository infrastructure, to create a comprehensive information system for stock exchange monitoring, to implement international standards for the operation of capital markets infrastructure (CSDR, EMIR, MIFID II, MIFIR, PFM requirements), and more.
In order to increase financial inclusion, financial institutions’ market behavior standards and financial products disclosure standards will be implemented, targeted programs for improving the financial literacy of the public will be strengthened, consumer protection will be enhanced, incentives will be created for the development of cashless payments infrastructure, and the deposit guarantee system will be expanded and streamlined.
Financial sector innovations will cover a wide range of activities, including developing the BankID remote identification system, creating a crowdfunding and venture capital platform and regulatory sandboxes, introducing new payment and transfer technologies, increasing financial market participants’ access to public registers, developing big data, blockchain, cloud technologies, and so on.
Thus, the Strategy envisages the reform of all segments of the financial sector: the banking market, the nonbank financial institutions sector, and capital markets. The implementation of the Strategy will create a transparent, competitive, stable, and high-tech financial sector over the course of five years. As such, it will drive the sustainable and inclusive development of the Ukrainian economy and contribute to improving the welfare of households through the efficient accumulation and redistribution of financial resources in the economy.
The Strategy was presented on 16 January 2020 with the assistance of the USAID Financial Sector Transformation Project. The document was signed by NBU Governor Yakiv Smolii, Minister of Finance Oksana Markarova, Head of the National Securities and Stock Market Commission Tymur Khromaiev, Managing Director of the Deposit Guarantee Fund Svitlana Rekrut, and Member of the National Commission for Regulation of Financial Services Markets Denys Yastreb.