Financial Stability Council Approves Lending Development Strategy

At its meeting held on 6 June 2024, the Financial Stability Council (FSC) approved the Lending Development Strategy (Strategy). The Strategy reflects a comprehensive vision of the key principles of lending development in Ukraine and the actions necessary for their implementation, which will contribute to a sustainable recovery of the country’s economy. The implementation of the Strategy is a matter of the country's financial security and a tool for building a dynamic and competitive economy capable of sustainable development and European integration.

The FSC members agreed that lending conditions for businesses and households are improving as macroeconomic stability is being maintained thanks to the consistent policies of the NBU and the government of Ukraine as well as significant international assistance. In particular, interest rates on loans are declining. At the same time, demand for loans is segmented, and a number of industries and regions face severe war risks that make it difficult for them to access necessary financing.

The Strategy aims to help provide financing for the reconstruction of energy infrastructure and stimulate demand aimed at improving the country's defense capability, in particular from defense industry, manufacturing, and agriculture, as well as from businesses in de-occupied territories and territories close to the frontline – the “resilience territories.”

The Strategy measures will be implemented in two focus directions: stepping up lending to priority areas under martial law and developing the legal framework to further stimulate market lending.

The implementation of the Lending Development Strategy will help expand access to credit, promote entrepreneurship, attract investment, create new jobs, and bring Ukrainians back from abroad.

During the meeting, the FSC reviewed systemic risks to the financial sector. Overall, thanks to the coordinated efforts of the NBU and the government, as well as international financial support, macrofinancial stability has been maintained and economic recovery continues.

The NBU has also finished considering the issue of setting a target level and a deadline for achieving it for the deposit guarantee system. The FSC recommended setting the target at 3.5% and reaching this ratio by 1 January 2028. This will pave the way for ensuring that the deposit guarantee system enjoys sufficient financing from participating banks and minimizing the risks of the state's participation in financing the guaranteed repayments to retail depositors.

For reference

The following FSC members participated in the meeting: Minister of Finance of Ukraine Serhii Marchenko, NBU Governor Andriy Pyshnyy, First Vice Prime Minister and Minister of Economy of Ukraine Yuliia Svyrydenko, Head of the National Securities and Stock Market Commission Ruslan Mahomedov, NBU First Deputy Governor Kateryna Rozhkova, NBU Deputy Governor Dmytro Oliinyk, Deputy Minister of Finance of Ukraine for European Integration Yurii Drahanchuk, and other top officials of institutions comprising the FSC.

The FSC was established by presidential decree in March 2015 and provides a forum for the professional discussion of systemic risks to national financial stability.