Credit-Rating: National Bank tries to refine the banking assets from non-liquid securities

In Credit-Rating’s view, the NBU’s (National Bank of Ukraine) introduction of changes to the procedure for forming of securities reserves will spur banking institutions to increase their capitalization in order to avoid possible shrinkage in assets. At the same time, the NBU’s introduction of new regulations for calculation of regulatory capital may force many banks to quote securities so that they meet the regulator’s requirements.

Credit-Rating’s leading analyst Viktor Shulik believes that the NBU stimulates the banks which have adhered to aggressive investment policy to increase the share of own funds in order to minimize risks of depositors.

In Credit-Rating’s view, the listing of securities will not mirror in full their liquidity, for in a number of cases the rates may be artificially maintained by market participants and have nothing common with investments. The agency’s experts think that some professional market players may trade the securities of certain issuers in order to maintain necessary listing level, so that the regulator's requirements would not be violated. At the same time, certain securities with market parameters may be held with banking institutions in their portfolios for trading or on-demand not being the subject for further resale.

Credit-Rating’s note: The NBU’s decree №211 introduces changes to the procedure for forming of securities reserves and approved the amendments to the instructions on regulatory procedures for banks in Ukraine concerning calculations of banks' regulatory capital. These changes have been confirmed by the NBU's decree №211 to be effective starting from October 14, 2008.

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