Page 56 - bne_July 2021_20210602

56 I Eastern Europe bne July 2021
governor Yakiv Smolii last summer, who claims he was pushed out under “intense political pressure.”
“My role at the NBU is to ensure the bank operates on an independent basis,” says Shevchenko, who ran the state-owned Ukrgasbank and worked in banking for 27 years before appointed governor of the central bank.
“There has been friction and there [is] political pressure to undermine the independence of the central bank but the continued independence of the NBU is no longer one of the IMF's concerns,” says Shevchenko.
“My priorities are to ensure the independence of the NBU as an institution and operationally. Also to ensure its financial standing and from the personal ambitions of the personnel,” the governor added.
The change at the helm has not gone smoothly, as Shevchenko got into
an ugly public fight with two of his deputies, as he took personal control over the bank sector clean-up process.
“To have personal control is important but the decisions made are not personal decisions but the decisions of the NBU made on a collegial basis. What conflicts there have been are behind us,” Shevchenko said. “Ukraine is a democratic country and we are proud of it. It is represented in the authority of our president and Rada. The independence of the NBU is also an aspect of this democracy. The difference is we have clear rules on how to operate. We are a technocratic organisation and so we try and keep away from politics.”
The two deputy governors – Kateryna Rozhkova and Dmytro Sologub – conducted much of the bank sector clean-up work under the previous governors, Gontareva and Smolii, but have been sidelined by Shevchenko, who also caused a scandal by publically rebuking them.
“Some members of the NBU had personal political agendas that was
www.bne.eu
incompatible with the NBU’s work.
It doesn't help the Ukrainian financial system,” says Shevchenko.
The NBU’s Council decided not to prolong Sologub’s five-year contract on June 24, which caused consternation amongst analysts, as he was well respected. Rozhkova remains in place for now, but there is little love lost between her and her new boss.
However, Shevchenko says these rivalries are a distraction from the task of cleaning up the non-bank sector, which will not be any easier than cleaning up the banks.
Bank reforms back on track
The banking clean-up that was carried out over the last six years has been one
Today the banking sector is sufficiently capitalised and profitable. As bne IntelliNews has reported, the banking sector’s profits in April have returned
to their 2019 level – the first year of strong growth post-revolution – but
are still behind the first quarter of
2020, when banking sector growth was accelerating again. The banking system today has high liquidity – about $7bn.
In 2020, banks' profits amounted to over UAH41bn ($1.4bn), the NBU reports.
“The banking sector is sufficiently capitalised. The regulatory capital adequacy of the sector for the second half of 2021 remained significantly higher – about 23% against 10% of the minimum required level. This allows banks to maintain their ability to absorb losses and continue lending to
“My priorities are to ensure the independence of the NBU as an institution and operationally. Also to ensure its financial standing and from the personal ambitions of the personnel”
of the greatest reform successes of the post-Maidan revolution and allowed the banking sector to get through the pandemic shock with little damage.
“Despite the heavy impact of the lockdown the crisis went well for the banks. In 2020 the NBU released an anti-crisis package of things like long- term refinancing of debt and interest rate swaps. It was a success,” says Shevchenko. “This year we have an exit strategy from these anti-crisis measures and will do it soon, but if the COVID problem returns or another threat appears we can immediately roll these measures out again.”
Nearly a hundred dodgy banks were closed down and the looting of depositors’ account via related-party loan scams largely ended. Bad debt and problem loans have all been provisioned for and regulatory control and inspection of the sector beefed up and made effective.
households, SMEs and large businesses during the crisis,” says Shevchenko.
Now the clean-up of banks is largely finished, the focus is shifting to the non- bank entities.
“A lot of work has been done but there is still a lot of work to do. Before the focus was on cleaning up the banking sector,” says Shevchenko. “Since the start of this year we have started to focus on the non- banking sector, where there are over 2,000 entities. It will not be less difficult than cleaning up the bank sector.”
“Now we are starting on cleaning
the non-banking sector we are facing pressures and there are a lot of players here that have vested interests,” added Shevchenko.
NPLs
But there is still a long way to go before Ukraine’s banking sector can get a clean bill of health. Despite all the progress