The current level of capital generally ensures the sector’s resilience to possible shocks and allows for further growth of the loan portfolio. The banking system of Ukraine has successfully completed the second stage of the transition to a new three-tier capital structure in accordance with EU requirements and as of January 1, 2025 maintains a sufficient capital reserve of all levels, reports Banker.ua with reference to the press service of the National Bank.
The NBU recalls that in accordance with the requirements of the Law of Ukraine “On Banks and Banking Activities” in force since August 5, 2024, banks have switched to a three-tier capital structure and new capital adequacy standards with the application of a number of transitional provisions, in particular, a phased schedule for achieving the minimum value of the regulatory capital adequacy standard, namely:
- from August 5, 2024 to December 31, 2024 – in the amount of not less than 8.5%;
- from January 1, 2025 to June 30, 2025 – not less than 9.25%;
- from July 1, 2025 – not less than 10%.
Due to the transition of banks to the new capital structure, its highest-quality component – Tier 1 capital – has increased (due to the inclusion of accumulated profits, which were previously mainly reflected in the capital of lower levels, and taking into account, in accordance with the transitional provisions, interim profit without its confirmation by an audit). Therefore, banks’ capital is currently sufficient to cover all key risks.
According to statistical reporting on the value of prudential standards as of January 1, 2025:
- the regulatory capital adequacy ratio in the banking system is 17.35%;
- the Tier 1 capital adequacy ratio is 16.92%;
- the Tier 1 core capital adequacy ratio is 16.92%.
In general, all banks as of January 1, 2025 meet the minimum capital adequacy requirements of all levels. At the same time, given the repeated retrospective increase in the income tax rate, banks will continue to reflect the increase in taxes and the decrease in profits for 2024 in their reporting. This will lead to a decrease in the capital adequacy ratios of individual banks.
The full effect of the tax increase can be assessed based on the results of the analysis of the annual financial statements of banks, confirmed by the audit. According to preliminary expectations, in general, banks will maintain a sufficient capital reserve, however, some of them may need to revise their capitalization programs based on the results of the 2023 sustainability assessment.
Despite some restraint on bank activity due to increased taxation, the applied transitional norms allow banks to further increase lending. The accumulated capital stock will contribute to banks’ compliance with minimum capital requirements and, in the future, to maintaining capital conservation and systemic importance buffers, the decision on the implementation of which will be made after assessing the stability of banks and the banking system in 2025.
