You're reading: Yanukovych: NBU to oversee realization of strategy for development of state banks

The National Bank of Ukraine is to oversee the realization of a strategy for the development of state-run banks, reads an annual address of the Ukrainian president to lawmakers presented to the parliament on July 3, 2012.

“[The NBU will oversee] the reorganization of state banks into a tool
of effective economic and financial policy via the adoption of a single
strategy for the development and operation of state banks, with
division of strategic directions for each of them… [via] the provision
of efficient controls by the NBU over the realization of the
strategies,” reads the document.

The head of state also supports the toughening of supervision over
the operation of large financial institutions and the monitoring of
systemic risks.

At present, the Finance Ministry carries out and forms state financial policy on the development of state banks.

According to the address, among the modernization goals is a
considerable change in financial proportions and the redistribution of
financial flows in favor of the real economic sector.

The head of state proposes to form a system of economic incentives to
encourage crediting as a part of the implementation of the state
programs supporting top-priority sectors and companies.

The president supports the establishment of a dialogue with the
central bank and commercial banks regarding the improvement of
mechanisms for the distribution of resources for crediting the economy
on the basis of the introduction of financial responsibility – banks are
to receive refinancing loans on the beneficial terms if they allocate
funds to top-priority goals of the economic development.

According to the address, it is proposed to form a package of
investment projects, and the commercial banks will be able to select the
most attractive ones for crediting.

As for risks in the domestic banking system, the address says that
they are also linked to high dependency on foreign parent companies. The
risk factors are the following: the high concentration of credits
issued, a rise in overdue debt for credits (according to the NBU, it is
up to 11.2% of the credit portfolio, while Standard&Poor’s said that
it is up to 50%, taking into account restructured credits) and the
strengthening of the dependency of the banking system on the state of
the national budget.

Also among risks are the large short-term foreign debts, the
retaining of sensitivity to exchange rate fluctuations in the conditions
of the restoring of a trend to the dollarization of banking deposits
and the low quality of assets, which fails to bring enough profits to
banks.