Top management of financial institutions weakens optimism in assessing current state of financial sector - NBU

The number of positively-minded top managers of financial institutions decreased from about 52% in November last year to about 45% in May this year, the balance of responses worsened from 26% to 21%, but remains positive, according to data from the National Bank of Ukraine (NBU).

“The majority of respondents reported that, in their opinion, the condition of the financial sector has not changed over the past six months. Every tenth survey participant stated that the condition of the financial sector has deteriorated, although six months ago this was not the case,” the National Bank said.

It is noted that two-thirds of heads of financial institutions do not expect changes in the state of the financial sector in the next six months. According to the statistics presented, the proportions of respondents expecting their condition to worsen or improve in the next six months were the same.

As for assessing the overall level of risk in the financial sector, more than half of the surveyed managers define it as generally average. However, the share of those who considered it high or very high dropped to 41% from 50% in the previous survey.

In addition, respondents have improved their own assessments of the financial sector’s resilience to significant negative events for the fourth time in a row.

“About 95% of respondents rated the stability of the financial sector as average or above. For the second half of the year in a row, the overall balance of responses is at the highest level since the survey began in 2018,” the central bank informs.

The overall balance on this issue in May of this year was 19%, increasing from November 2023 by 1 percentage point (p.p.).

The war with the Russian Federation continues to be called the main source of risks in the financial sector. Other key risks, according to the heads of financial institutions, are also associated with the continued influx of foreign capital (rose from the fourth position in November 2023 to the second one), the activities of law enforcement agencies and the judicial system, as well as fraud and cyber threats. Rounding out the top five is the risk of quality of human capital in the financial sector, which rose from seventh place in the November 2023 survey.

The risks of protecting the rights of creditors and investors have also noticeably increased (increased by three positions from November 2023). However, according to respondents’ answers, the role of risks associated with the dynamics of world prices for raw materials, the quality of legislation and the tax system (down by four positions), as well as inflationary changes, weakened.