Ukrainian banks will undergo stress testing in 2025.

NBU approved the plan for evaluating the stability of banks for 2025

The National Bank of Ukraine has approved the plan for assessing the stability of banks and the banking system for 2025. The evaluation will be conducted as of January 1.

'After a four-year hiatus, the assessment of the stability of banks and the banking system will be carried out using a standard procedure involving external auditors to assess asset quality and the use of a negative scenario in stress testing,' the regulator reported.

The assessment will include three stages

It is noted that the assessment will include three stages:

• assessment of asset quality by independent auditors,
• extrapolation of results,
• stress testing of the largest banks under baseline and negative scenarios.

The third stage of stress testing will concern the largest banks, considering the volume of funds of individuals, asset risks, and the volume of loans to individuals, as well as banks that require capital strengthening based on the results of the stability assessment in 2023.

According to preliminary estimates, this approach will involve stress testing around 20 banks and cover more than 90% of the net assets of the banking system. The stability assessment will be conducted as of January 1, 2025.

'Stability assessment is a classic tool for analyzing the banking sector and its risks, used by many regulators worldwide,' said NBU Chairman Andriy Pyshnyi. - 'Banks have adapted to operate under the conditions of a full-scale war and are showing quite high financial results, so we can return to annual assessment. This will allow identifying potential problem areas and, if necessary, strengthening them to ensure the banking system continues to successfully cope with challenges.'

Timeline for assessment and stress testing

According to the schedule, in December 2024, the National Bank will approve the technical task and the list of banks for stress testing, and auditors must complete the asset quality assessment by the end of April 2025. By August 10, the NBU will approve the results of the assessment and, if necessary, send requirements regarding capitalization or restructuring programs to the banks.