Ukraine’s banking regulator names the key risks to financial stability in the banking market.

Banks in Ukraine have maintained financial stability and their clients’ trust while increasing lending and their participation in financing the budget deficit, the NBU reported. The regulator states that the economy generally remains resistant to war shocks, and the government’s gradual reduction of the budget deficit supports it.

However, risks have increased: increasing intensity of hostilities, destruction of energy infrastructure, electricity shortages, and the lack of skilled personnel have cumulatively worsened business expectations. Therefore, enterprises are postponing their plans to increase production and investment in development, and the demand for business loans remains moderate. At the same time, growth in consumer income is fueling consumer sentiment and creating the prerequisites for growth in retail credit demand. The slowdown in inflation has contributed to the further reduction of interest rates.

According to the NBU, hryvnia bank account volumes are increasing due to growth in consumer and commercial income. The annual growth rate for net hryvnia business loans is 12%, corresponding with banks’ plans. However, business demand is limited by slow economic recovery, power outages, and high war risks.