FINANCIAL SECTOR OF UKRAINE: FUNCTIONING IN THE CONDITIONS OF WAR

Abstract

The article examines the trends in the functioning of the financial sector of Ukraine in wartime conditions. A full-scale war has led to a deep crisis, the consequences of which will be long-lasting and significant for the financial sector. The activity of banking institutions maintains continuity, liquidity and continues lending, although it has become unprofitable. A major role in this was played by the National Bank of Ukraine, which has been reforming the banking system since 2015, and made a timely response to changing circumstances. Non-bank financial institutions turned out to be significantly more vulnerable to operational risk and a significant number of them were forced to cease their activities. The NBU introduced regulatory relaxations to facilitate the operation of banks and non-bank financial institutions under martial law. The regulator has taken the necessary measures to support the financial sector, then each market participant must ensure the support and recovery of their activities. Further recommendations regarding the support of the financial sector by the state (increasing the volume of state concessional lending to businesses; increasing the volume of lending to the government; legislative settlement of issues related to loss, damage to property of borrowers of funds as a result of military operations; legislative settlement of issues regarding the possibility of suspending the activities of credit unions that have financial problems for the period of martial law), by the regulator (strengthening financial monitoring of financial market participants; prompt and flexible response to changes in market conditions) and financial institutions (improvement of credit risk assessment approaches to make them commensurate with the depth of the current crisis; adaptation of business models to current operating conditions; improvement of cyber protection systems; timely preparation and submission of reports to the NBU, informing the regulator about the risks of violating the requirements for financial indicators) are outlined.