Page 44 - UKRRptJune18

According to the agency, in late March, most of the largest 25 banks (together representing over 90% of sector assets) were compliant with the standard regulatory capital adequacy requirement of 10%. This will become mandatory again for all banks in 2019 (vs 7% during 2018), as the regulatory forbearance which was allowed following the asset-quality review expires.
Earlier, the National Bank of Ukraine (NBU) said it is going to conduct new stress tests of the 25 Ukrainian largest banks in 2018, which account around 93% of all assets of the banking sector.
The regulator will test PrivatBank, Oschadbank, Ukreximbank, Raiffeisen Bank Aval, Alfa-Bank, Ukrgasbank, FUIB, UkrSibbank, Sberbank, Ukrsotsbank, OTP Bank, Bank Pivdenny, Credit Agricole Bank, Prominvestbank, TAScombank, Procredit Bank, Kredobank, VTB Bank, Bank Credit Dnepr, Megabank, Bank Vostok, A-Bank, Idea Bank, Universal Bank and also Bank of Investment and Savings (BIS-Bak).
The stress tests will be carried out in three stages. The first stage will include auditing the quality of the bank's assets and the acceptability of collateral for loans by audit firms. The second stage is the extrapolation by the NBU of the results of the first stage and an assessment of the capital adequacy of banks.
The third stage is the NBU's assessment of the capital adequacy of banks based on the results of stress testing for basic and unfavourable macroeconomic scenarios, Interfax news agency reported on March 15 According to the previous stress tests , conducted by the NBU in 2015, only four out of the top 20 banks do not need additional capital. Recapitalisation programmes were designed for three years after the tests. Some of the tested banks were later recognised as insolvent.
Meanwhile, according to Fitch, impaired loans, which are mostly legacy exposures and include both those more than 90 days overdue and those with a low probability of repayment, represented 56% of loans at the end of the first quarter of 2018.
"Loan work-outs remain slow, partly constrained by legal aspects of the borrower bankruptcy process, but reserve coverage is reasonable at 86%," Fitch added.
Unreserved impaired loans equalled 52% of sector equity at the end of 2017, the majority of which are held by state-owned banks (60%, mostly by Ukreximbank and Oschadbank, while PrivatBank’s portion is only 6%), followed by foreign-owned banks (32%).
In 2018, the National Bank of Ukraine (NBU) will conduct a new asset-quality review and capital stress test on the largest 25 banks to identify any capital shortfalls that need to be covered by bank owners.
44 UKRAINE Country Report June 2018 www.intellinews.com