The National Bank of Ukraine (NBU) has improved the requirements for organizing a risk management system in banks and banking groups, including obliging banks to control the evaluation of property received as collateral, the NBU press service has said.

The changes were adopted in NBU Board resolution No. 172 dated December 29, 2020, which was posted on the regulator's website and came into force on December 31, 2020.

According to the document, control over the appraisal of property pledged on secured loans provides for verification of the property value, rotation of property appraisers, monitoring of the independence of the external appraiser selection process and back testing of the property value (analysis of the comparability of the property sale value with its value determined during the last estimates).

According to the NBU, in 2020 Bank Arcada and Misto Bank were withdrawn from the market due to problems with collateral.

The regulation also improved the requirements for the transfer of certain functions by banks to outsourcing. In particular, it determined the list of functions that cannot be outsourced, the list of functions, the implementation of which is not considered as allowed for outsourcing, and also made the bank responsible for the risks associated with the transfer of functions for outsourcing.

In addition, the National Bank authorized a responsible person of the banking group to organize a risk management system without taking into account the members of the banking group who do not have a significant impact on the activities of the banks, which are members of the banking group. This will help to ensure the comparability of the magnitude of risks and costs of managing them.

The regulator also clarified the definition of the positions of the Chief Risk Manager and Chief Compliance Manager, taking into account the different organizational structure of banks and simplified the procedure for automatic credit decision making for standardized credit products, which will facilitate the promptness of credit decision making.

The NBU also increased the frequency of reporting on operational risk to the bank's board and the frequency of stress testing of operational risk, which will reduce the burden on banks when preparing management reports.