Retrospective Genesis and Strategic Directions of the Development of Ukraine's Banking System (Financial and credit systems prospects for development)

Summary

• In 2022 the number of banks fell by 5.6% compared to 2021, while banks' net assets grew by 14.5% and net interest income by 29%.p.7
• Banks' net profit plummeted by 71.7% in 2022.p.7
• The government decided to raise the tax rate on bank profits to 25% in 2025 and 50% starting in 2026.p.7
• Loans made up nearly 52% of total bank assets before the full-scale invasion; securities and certificates of deposit reached 50.2% of assets by the end of 2025.p.8
• Return on assets was highest in 2021 at 3.8%, lowest in 2022 at 0.9%, and rose to 3.2% by the end of 2025.p.8
• The authors date the formation of the banking system to 1991, when the Law of Ukraine 'On Banks and Banking Activities' was adopted.p.4

Key insights

1. The first Ukrainian bank-type institution cited by one group of scholars is the Ukrainian Investment Bank, created on January 24, 1989.p.4
2. The Deposit Guarantee Fund for Individuals was established in 1998 to revitalize banking activity.p.5
3. Foreign capital expansion between 2004 and 2007 fueled a golden age of consumer lending but laid the groundwork for future crises.p.5
4. The nationalization of PrivatBank and the state's recapitalization helped prevent a collapse of the financial system.p.6
5. Bank net assets rose 14.5% in 2022 even as the number of banks fell by 5.6%.p.7
6. The return on banks' investments in securities stood at 6.3% in the reporting year.p.8
7. Open banking is presented as a key current trend, helping harmonize the payment market with PSD2.p.9