KIEV: The higher export council at the Council of the National Bank of Ukraine (NBU) believes that stress tests of state-run banks should be conducted each six months. The proposal is outlined in the list of recommendations to the Ukrainian government and the NBU Board on the strategic objectives underlying the development strategy for state-owned banks drafted by the expert council at a meeting on March 24, 2017 and posted on the NBU’s website. As strategic objectives of state-owned banks, the expert council recommends focusing on their competitive advantages, optimizing the network of state-owned banks and consolidating the strategic objectives and tasks facing these banks to restore lending to the economy. As for assets and liabilities management, the council recommends setting a limit on large exposures and credit risk concentration to large borrowers; coordinated fundraising policy; syndicated lending to the economy; and a unified approach to toxic asset management. Preventing the possibility of abuse of the monopolistic position of state-owned banks, the council recommends deepening of specialization of state-owned banks; preparations for mergers for banks that cannot be nationalized; and privatization of state-owned banks should be carried out in a cost-efficient manner for the state. As for capitalization and privatization, the expert council recommends the centralized development of instruments for raising additional capital (subordinated debt, DRs, IPO, and other tools).
Some proposals concern the corporate governance: the expert council recommends modifying the procedure for forming supervisory boards: depoliticisation; competitive selection procedure to appoint independent experts; and the formation of the bank’s management bodies should meet the transparency requirements. The proposals drafted by the higher expert council will be submitted to the NBU Board, the Cabinet of Ministers of Ukraine and the relevant parliamentary committee. In general, the council said that a new strategy of reforming state-owned banks should aim to transform state-owned banks into economically independent financial institutions that will not require budget support in the medium term; develop corporate governance in state-owned banks to minimize the potential conflict of interest between the bank management and representatives of the owner – the state; prevent corruption at state-owned banks; encourage healthy competition between state-owned and private banks to comply with antimonopoly laws and regulations. As reported, the Finance Ministry of Ukraine seeks to draft the development strategy for state-owned banks and present the bill by May 15.
