May 5 – 9, 2025. Certain requirements for banks' credit risk assessment have been restored

The Ministry of Finance of Ukraine, by Order No. 171 of March 25, 2025, approved the Procedure for monitoring the activities of financial agents (including surveys).

The Procedure determines the directions and features of monitoring the activities of financial agents by supervisory authorities (hereinafter – monitoring), as well as the features of conducting surveys of financial agents that are Reporting Financial Institutions for the purposes of applying the Common Reporting Standard (CRS).

The objectives of monitoring as a method of tax control are to identify:

• organizations that are Accountable Financial Institutions (hereinafter – AFI), but have not submitted an application for registration as AFI with the regulatory authority in accordance with the requirements of paragraph 39³ .3 of the Tax Code;
• AFIs that do not submit reports on accountable accounts;
• business entities that are accountable financial institutions of Ukraine in accordance with the requirements of the FATCA Agreement;
• possible risks of violation of the AFI requirements for due diligence of Financial Accounts and identification of Reportable Accounts;
• risks of participation by entities, including those that are AFIs, in acts or practices aimed at evading the obligations of the legislation implementing the Common Reporting Standard and the identification of Reportable Accounts for the purposes of the CRS Multilateral Agreement;
• financial agents who fail to submit reports on accountable accounts on time;
• AFIs that submit reports on accountable accounts with inaccurate, incomplete or erroneous information;
• AFIs that violate the requirements of paragraph 39³ .5 of the Tax Code regarding the storage of documents and information confirming the implementation of due diligence measures by the financial agent.

During monitoring, regulatory authorities use:

• information from reports on accountable accounts, from tax and financial reporting, additional information and/or justification (explanation) provided by financial agents upon requests from regulatory authorities in accordance with the requirements of Article 39³ , Section I of the Tax Code;
• information from the information and communication systems of the State Tax Service;
• information (materials and data) from regulatory authorities obtained during inspections;
• information received from competent authorities of foreign states; tax information received in accordance with Article 73, Chapter 7, Section II of the Tax Code;
• information received from the NBU and the National Securities and Stock Market Commission in accordance with item 72.1.2.7 of the Tax Code;
• FATCA Foreign Financial Institutions (FFI) list search and download tool;
• information received by regulatory authorities from other state authorities of Ukraine;
• information databases, state registers and other information of state authorities of Ukraine;
• analysis of any information sources containing open information and providing information about the organization's activities.

The National Bank of Ukraine, by its Resolution No. 52 of May 6, 2025, within the framework of the implementation of the goals set by the Strategy of the National Bank of Ukraine and the Strategy for the Development of Lending, continues the gradual restoration of the requirements for banks temporarily suspended since the beginning of the introduction of martial law. The restoration of the specified requirements is timely given the long-term economic recovery and the need to increase the stability of the sector for more active lending to the economy in the future.

In particular, the requirements of the Regulation on determining the amount of credit risk by banks of Ukraine for active banking operations are being restored :

• from October 1, 2025, the signs of a debtor default event related to making significant changes to the terms of loan agreements, including debt restructuring, will be applied again. At the same time, the signs of default will not be applied to restructurings carried out before September 30, 2025, provided that such restructured agreements comply with the conditions established by the Rules for Banks' Operations in Connection with the Introduction of Martial Law in Ukraine. Banks will still be able not to transfer loans that were restructured during this period using long-term instruments to the non-performing assets unit for maintenance;
• From February 1, 2026, it is planned to use information from the National Bank's Credit Register when assessing the debtor's risk. This approach will contribute to the completion of restructurings initiated by banks, taking into account the period of full transition to the National Bank's Credit Register - 2.0.

The National Bank also reinstates temporarily suspended requirements established in:

• Regulations on the organization of the distressed asset management process in Ukrainian banks, namely:

• by December 31, 2025, banks must update their distressed asset management strategy and operational plan for its implementation and update them annually thereafter;
• from February 1, 2026, banks must use information from the NBU Credit Register when determining the list of early warning indicators;

• Regulations on the organization of the risk management system in Ukrainian banks and banking groups regarding the renewal from October 1, 2025 of requirements for updating by banks / responsible persons of banking groups of intra-bank / intra-group documents on risk management, as well as conducting stress testing of bank risks and verification of property value;
• Regulations on recovery plans for banks of Ukraine and banking groups, namely requirements for banks to use specific and combined scenarios for stress testing when updating bank recovery plans, with the following features:
  • systemically important banks and banks that are responsible persons of banking groups shall update their recovery plans annually and in the event of events/circumstances that have led to significant changes in the bank's operations, starting in 2025;
  • other banks update their bank recovery plans once every two years, starting in 2026, and in the event of events/circumstances that have led to significant changes in the bank's operations, starting in 2025.

The Ministry of Economy of Ukraine, together with the Verkhovna Rada Committee on Economic Development, is for the first time applying the procedure provided for by law to expand the list of goods subject to the localization requirement.

The initiative was based on appeals from Ukrainian manufacturers of 25 types of products who expressed a desire to join the localization policy. This shows that the localization mechanism is working successfully and creates real incentives for industrial development.

In July 2022, amendments to the law on public procurement came into force, gradually increasing the requirement for localization, i.e. the share of the Ukrainian component in certain goods. Over 10 years, it should increase from 10% to 40%. In 2025, the localization level should be at least 25%.

Currently, the localization requirement applies to 103 products from four areas of mechanical engineering: railway transport, urban transport, municipal equipment, and energy equipment.

It is planned to expand localization to 25 more products in the following categories:

• mechanical engineering, including elevators, tractors, etc.;
• light industry goods, including workwear and military uniforms;
• lighting fixtures, cables, traffic lights;
• metal structures and large diameter pipes.

The localization requirement does not apply to goods produced in countries that are parties to the WTO Agreement on Government Procurement (GPA), including the EU, the USA, Japan, South Korea, the UK, and others.

The National Bank of Ukraine approved the methodology for stress testing of banks in 2025, which begins in June. Approaches to stress testing of banks are determined by Decision No. 156-рш of May 6, 2025"On Amendments to the Terms of Reference for Assessing the Stability of Banks and the Banking System of Ukraine in 2025", which entered into force on the day of its adoption.

We will remind that stress testing is one of the stages of assessing the stability of banks. This year, 21 banks, accounting for over 90% of the banking system's assets, will undergo stress testing.

In 2025, the National Bank will resume stress testing of banks using an adverse scenario. The previous assessment of bank resilience in 2023 only provided for the calculation of performance indicators for the next three years under the baseline macroeconomic scenario based on the National Bank's macroeconomic forecast.

Further adaptation of banks to martial law conditions, increasing activity and balance sheet volumes requires a more complete risk assessment. Stress testing under an adverse scenario will allow determining the resilience of banks to possible adverse events in the future.

The National Bank's adverse stress testing scenario reflects a hypothetical sufficiently deep and protracted crisis. The assumptions about the depth of the crisis are based on the experience of stress testing banks in the EU. In particular, in the first year of the adverse macroeconomic scenario, a decrease in GDP of -3.1% is assumed. Other assumptions about changes in macroeconomic indicators for stress testing in 2025 can be found at the link .

The forecast horizon of stress testing will traditionally be three years. The balance sheet of banks will be static in the forecast period: the structure and volume of assets will not change (except for changes solely due to the effects of risks and exchange rate revaluations).

Also, traditionally, the stress test will assume the realization of credit and market (interest rate and currency) risks.

• Credit risk arises from the deterioration of loan quality. The deterioration parameters are determined for loans to large corporate debtors individually and for other loans on a portfolio basis.
• Interest rate risk in an adverse scenario is realized due to the unchanged interest rates on assets and the increase in the cost of liabilities.
• Currency risk is realized through the revaluation of the open currency position due to devaluation, changes in the currency risk component of market risk, and indirectly through credit and interest rate risks.

Additionally, in an adverse scenario, the National Bank also predicted the impact on banks' capital of the realization of operational risk.

Based on the results of stress testing, the necessary levels of capital adequacy standards will be determined for banks, which will help protect them from violating regulatory requirements and insolvency even in crisis conditions.

If the calculated required capital adequacy levels of the bank are found to be higher than the regulatory values of the indicators, the bank will need to draw up a capitalization/restructuring program. The implementation of the program should ensure the achievement/compliance with the established required capital adequacy levels.

Information on the results of the sustainability assessment will be made public at the end of the year.