New Financial Sector Development Strategy: Confronting the Challenges of War in the Financial Sector and Supporting Ukraine’s Economic Recovery

The National Securities and Stock Market Commission (NSSMC), the National Bank of Ukraine, the Ministry of Finance of Ukraine and the Deposit Guarantee Fund have approved a new Strategy for the Development of the Financial Sector of Ukraine.

The document sets out current priorities and goals for the development of the financial sector, focused on resisting Russian aggression and rebuilding the country. Its development is envisaged by the Memorandum of Economic and Financial Policies between Ukraine and the International Monetary Fund.

«Today, our strength is in unity and support of each other, and this also applies to the financial system of Ukraine. By combining our efforts and having ambitious common goals, the regulators and the Deposit Guarantee Fund will be able to overcome any challenges of today, act effectively to restore Ukraine’s economy and preserve the welfare of our citizens during the war. Our goal is to keep the financial rear, boldly integrate our markets into international standards and bring victory closer together», said Ruslan Magomedov, Chairman of the NSSMC.

The Strategy envisages that joint actions of the regulators and the Deposit Guarantee Fund in the financial sector will be aimed at achieving the following five strategic goals

• macroeconomic stability,
• financial stability,
• financial system working for the country’s recovery,
• modern financial services,
• institutional capacity of regulators and the DGF.

The measures envisioned by the Strategy are divided into short-term measures aimed at ensuring stability and preventing deterioration in the financial sector and the economy as a whole; and medium-term measures that will form the basis for future economic recovery and growth.

The Strategy defines the future priorities of the financial system, which include, among other things, ensuring the sustainability and capacity of domestic capital markets, including by developing their infrastructure and introducing new types and improving existing financial instruments; introducing regulation and supervision of the virtual asset market; and improving the efficiency of financial sector regulators. Given favorable and stable macroeconomic conditions, the NBU expects to gradually strengthen the long-term sustainability of the pension system.

Despite the war, the Strategy states the need to continue the technological development of financial services as a prerequisite for further expanding financial inclusion and ensuring cybersecurity. Measures to restore the financial infrastructure in the de-occupied territories and to ensure the barrier-free and inclusive nature of the financial sector are also important.

The Strategy pays special attention to the implementation of European legislation and international best practices in the areas of financial sector regulation and supervision, insolvency resolution, and the removal of financial institutions from the market. The focus is on gaining internal market treatment with the EU in the financial services sector, as the unconditional common priority of all participants who have joined the Strategy is Ukraine’s accession to the EU.

As the war conditions cause high overall uncertainty, the new Strategy is open-ended. By systematically analyzing the impact of the external environment, the regulators and the Deposit Guarantee Fund will refine joint plans to achieve the goals of the Strategy and work on their implementation for as long as necessary. In this regard, the Strategy also sets out a short list of key indicators that are important in the short term during a full-scale war, which will be updated as necessary.

For reference.
The Financial Stability Council, within which the regulators cooperated to develop the new Strategy for the Development of the Financial Sector of Ukraine, approved it at a meeting on July 19, 2023.

The Strategy has also been approved by the regulatory acts of the developing institutions, in particular by the Resolution of the NSSMC dated August 1, 2023 No. 843.

The new Strategy will replace the previous one, which was designed for the development of the financial sector until 2025, and is available here.