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Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine

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Ukraine’s banking sector was strongly hit by the global economic crisis which began in September 2008 and triggered an extreme output contraction (–20%) in the first quarter of 2009 and a sharp depreciation of the Ukrainian hryvnia (–35%). Loss of confidence in the banking sector and deposit withdrawals (about one-fifth of total deposits) were reined in by large-scale liquidity support by the National Bank of Ukraine, administrative measures and macroeconomic adjustment (unwinding of the current account disequilibrium) in the spring of 2009. However, credit growth (month on month) ground to a halt in early 2009 and confidence in the hryvnia remains fragile in a situation where about 50% of private sector credit stock is denominated in foreign currency. The authorities’ bank recapitalization program, assisted by the structural conditionality of an IMF Stand-By Arrangement, should help banks cope with the persisting deep recession and strongly rising nonperforming loans. While political instability in the run-up to the presidential election early in 2010 could yet derail bank rehabilitation, credit institutions have substantially raised provisioning and started cutting costs and restructuring overdue loans. Continuing support by international financial institutions and sustained commitment by foreign (including Austrian) parent banks and corporations also represent key stabilizing factors.

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  • Stephan Barisitz & Mathias Lahnsteiner, 2009. "Investor Commitment Tested by Deep Crisis: Banking Development in Ukraine," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 18, pages 67-75.
    • Handle: RePEc:onb:oenbfs:y:2009:i:18:b:2
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    Cited by:

    1. Stephan Barisitz & Zuzana Fungáčová, 2015. "Ukraine: struggling banking sector amid substantial uncertainty," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 29, pages 72-92.
    2. Mathias Lahnsteiner, 2020. "The refinancing of CESEE banking sectors: What has changed since the global financial crisis?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/20, pages 6-19.
    3. Ruoyu Cai & Mao Zhang, 2017. "How Does Credit Risk Influence Liquidity Risk? Evidence from Ukrainian Banks," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 241, pages 21-32.
    4. Stephan Barisitz & Ulrich Gunter & Mathias Lahnsteiner, 2012. "Ukrainian Banks Face Heightened Uncertainty and Challenges," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 23, pages 50-57.
    5. repec:onb:oenbwp:y:2012:i:23:b:1 is not listed on IDEAS
    6. Stephan Barisitz & Mathias Lahnsteiner & Daniela Widhalm & Tina Wittenberger, 2014. "Macrofinancial Developments in Ukraine, Russia and Turkey from an Austrian Financial Stability Perspective," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 27, pages 64-73.
    7. Hans-Joachim Dübel & Simon Walley, 2010. "Regulation of Foreign Currency Mortgage Loans : The Case of Transition Countries in Central and Eastern Europe," World Bank Publications - Reports 12943, The World Bank Group.
    8. Jana Grittersov�, 2014. "Transfer of reputation: Multinational banks and perceived creditworthiness of transition countries," Review of International Political Economy, Taylor & Francis Journals, vol. 21(4), pages 878-912, August.
    9. Barisitz, Stephan & Fungáčová, Zuzana, 2015. "Ukraine: Struggling banking sector and substantial political and economic uncertainty," BOFIT Policy Briefs 3/2015, Bank of Finland Institute for Emerging Economies (BOFIT).

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