​The Government has approved the updated Strategic Reform Principles of the State Banking Sector

2/21/18

Today, the Government of Ukraine has approved the updated Strategic Reform Principles of the State Banking Sector which were elaborated by the Ministry of Finance jointly with international financial institutions.

What’s it about?

One of the Government’s key priorities is to accelerate economic growth, which is impossible without an effective banking sector. That’s why the state strategy for the banking sector is based on the economic growth targets as well as on the tasks of the state as a shareholder of commercial banks and is planned to be implemented within 5 years.

The key tasks of the banking-sector Strategy:

- significant reduction of the state share in the banking sector through the complete or partial sale of state-owned banks
- increasing competition in the banking sector
- support for financial stability
- resumption of loan supply for the real economy sector
- improving access to banking services

The development strategy of the state banking sector is focused on 4 areas:

1. Improvement of the effectiveness of the management model in state-owned banks through strengthening discipline and implementing the strategy as well as creating more added value for the state before departing from the banks’ capital. There must be a unified bank management model in place with all management and controlling functions for state-owned banks consolidated at the Ministry of Finance.
2. Implementation of plans for the withdrawal of the state from its former banks to ensure their higher value.
3. Implementation of strategies for selected banks aimed to resume their operation as stable, successful and profit-oriented entities.
4. Elaboration and implementation of approaches for handling bad loans aimed to reduce their impact on the balance sheets of state-owned banks and to maximize their rest value.

Strategies for each single bank shall contain the following elements:

- improvement of the corporate management and establishment of supervisory boards mostly consisting of independent professionals as well as the reforms of the corporate management pose the key condition for the strategy implementation;
- stable operational platform, sufficient capitalization and stable IT infrastructure;
- strategic focus for each each bank which shall enable it to develop on the basis of its individual competitive advantages;
- reduction of risks related to the state – reduction of the share of state domestic bods in the balance of the banks as well as reduction of loans provided to state-owned companies;
- settlement of problem assets.

What’s the benefit?

The implementation of the state strategy in the banking sector will make it possible to achieve substantial benefits for the entire banking sector, to make it profitable and more attractive for international and Ukrainian investors as well as for Ukrainian economy by ensuring access to additional funding at more attractive rates and by generating additional revenues for the state budget.

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