NBU boosts banks’ credit potential
The National Bank of Ukraine (NBU) updated the minimum
requirements for banks’ capital adequacy standards according to a new
(three-level) structure together with the adoption of the Credit Development
Strategy, the NBU reported on official web-site.
"In the opinion of the NBU, the transitional provisions preserve the banks' capital reserve, which is necessary to cover the risks of martial law and ensure the interests of depositors. At the same time, taking into account the transitional provisions, the potential of banks to increase the credit portfolio will increase by one and a half times compared to the current stock," the NBU said.
The updated regulations are aimed at further ensuring the stability of the banking system, protecting the interests of bank depositors and preserving financial stability.
The transitional provisions include, in particular, the application of a phased schedule for achieving the minimum value of the regulatory capital adequacy standard, the NBU said.
The NBU also gave banks the right to include in Tier 1 capital the amount of profit for the first six months and nine months of 2024 without prior approval by the regulator and review of interim financial statements.
The amount of profit must be reduced by the amount of dividends determined to be paid from such profit, and the period of inclusion of such profit in the capital is limited to the date of the annual general meeting based on the results of 2024.
Tier 1 capital may also include funds received by the bank as payment for common shares or aimed at increasing their nominal value. Banks have the right to include such funds in capital during 2024, which will contribute to the completion of measures already taken by banks regarding their recapitalization, the NBU believes.
The NBU gave banks the right to include instruments with write-off/conversion conditions, subordinated debt for the period of the NBU's reconciliation procedures in accordance with the documents submitted by the banks, in the calculation of additional level 1 capital, level 2 capital.
"The introduction of such transitional provisions by the National Bank ensures a balance between regulatory requirements aimed at ensuring financial stability and the implementation of measures in accordance with the Credit Development Strategy," the release said.
The NBU also established temporary features of credit risk assessment for specialized loans for the period of martial law and one year after its termination or cancellation.
Thanks to the innovations, credit risk assessment mechanisms for specialized loans granted in such areas as project and object financing (lending) have been adapted.
Banks will be able to classify the loan as specialized if there is no collateral of corporate rights in the presence of high-quality guarantees, the presence of a special purpose company implementing the project, according to the reporting of income from sources other than the implementation of the project, and evaluate the specialized loan according to a special approach during the entire project implementation period.
The NBU expanded the list of exceptions to the established prohibitions, which will allow banks to conduct active operations with related parties — leasing companies that are part of one of the banks of the banking group. The introduction of such features will contribute to the expansion of credit support for the economy of Ukraine, including financing of priority industries. It will provide an impetus to the development of specialized lending (project, facility financing), the NBU believes.
The relevant decisions were approved by NBU Board Resolution No. 65 dated June 7, which takes effect from June 11, in addition to the introduction of updated requirements for capital adequacy standards, which will be implemented from August 5, 2024, and Resolution No. 66 of June 8, 2024, which comes into effect from June 11, 2024.
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