State banks during wartime: key issues and response measures

Abstract

Introduction. Ukrainian banking system in general and state-owned banks in particular have faced a set of unprecedented threats, risks and challenges associated with the outbreak of open armed aggression against Ukraine. The negative consequences of hostilities were, in particular, the loss of physical access of banks and customers to some branches and payment infrastructure, the growth of defaults and the suspension of lending. Problem Statement. Improving the stability and reliability of the banking system through the intervention of the central bank and creating favorable conditions for business. Purpose. The aim is to analyze the consequences of the armed conflict on the banking sector and substantiate the list of measures to reduce or neutralize this impact. Methods. General and special methods are used: analysis, synthesis, grouping, description, comparison, theoretical generalization and abstract-logical. Results. The actions of the Government and the National Bank in martial law were generally adequate, including measures to support the most vulnerable groups, reduce tax pressure on business, stimulate business activity by providing cheap loans under a number of government programs, comprehensive support for the banking system through the refinancing mechanism, mitigation of some regulatory requirements. The war made significant adjustments to the strategy of reforming state-owned banks. The structure of households\' funds also changed due to the sudden transformation of the pattern of their behavior. State-owned banks prefer to invest in treasury bills and NBU certificates rather than lending to customers. The main reason for the restrained growth of loan portfolios can be considered a decrease in demand for loans from reliable borrowers, and increasing credit risks. Conclusions. Banks with state capital have demonstrated their financial stability, have not experienced significant withdrawals from accounts, but have preferred to lend to large corporations or provide financial support to SMEs only through government programs of concessional loans. It is expedient to develop national loan restructuring programs together with the banking community, it is time to return to the idea of creating a full-fledged development bank in Ukraine on the basis of existing state-owned banks.