An exchange rate of 60 hryvnias per euro and the risk of a new wave of bank collapses: Ukrainian bankers are concerned about the memorandum with the IMF

Ukraine faces the risk of a new “bank collapse” similar to the one that occurred during the tenure of National Bank Chair Valeria Gontareva from 2014 to 2017, when nearly 90 banks were closed. During that period, the number of banks in the country fell from 180 to 93, with depositors having to undergo bureaucratic procedures to recover their funds, often losing a portion of their savings, as compensation was capped at 200,000 UAH.

The Deposit Guarantee Fund paid out a total of 90 billion UAH in compensation to depositors, borrowing funds from the National Bank and the Ministry of Finance, with some debts still unpaid.

Now, there is renewed concern in the financial market due to new capital requirements for banks, which the Ukrainian authorities, including the National Bank, agreed to in October 2024 as part of the latest IMF memorandum. These requirements could lead to the closure of many banks.

According to key excerpts from the memorandum published by the media, Ukraine has committed to implementing an EU directive that requires banks to maintain a minimum charter capital of 5 million euros. This is significantly higher than the current requirement of 200 million UAH (approximately 4.4 million euros at the current exchange rate). As soon as Ukraine enforces this new IMF requirement, many banks may face capital shortfalls.

The National Bank has pledged to prepare a draft law by January 2025 to introduce the new capital requirement of 5 million euros. After the law is passed by the Verkhovna Rada, banks will have six months to comply. Those unable or unwilling to meet this requirement will lose their banking licenses, leading to closures. In the event of a bank’s liquidation, depositors’ funds (deposits, card accounts, etc.) will be compensated by the Deposit Guarantee Fund. During martial law and for three months after its conclusion, the state guarantees 100% compensation for bank deposits (in peacetime, the limit is 600,000 UAH). Therefore, the compensation costs for depositors during the war could be substantial.

As of September 1, 2024, the official exchange rate is 44.4 UAH per euro, and the 5-million-euro capital requirement amounts to 222 million UAH. According to official NBU reports, ten Ukrainian banks currently have charter capital below this level:

1. “Kominbank” — 215.7 million UAH,
2. “Sky Bank” — 200 million UAH,
3. “Ukrainian Capital Bank” — 200 million UAH,
4. “Trust-Capital Bank” — 200 million UAH,
5. “Citibank” — 200 million UAH,
6. “Family Bank” — 200 million UAH,
7. “Oxy Bank” — 200 million UAH,
8. “Policombank” — 200 million UAH,
9. “Motor-Bank” — 200 million UAH,
10. “Portal Bank” — 200 million UAH.

All these banks would immediately be at risk of closure once the new capital requirement is enacted.

However, the situation could become even stricter. According to sources, in 2025, the NBU plans to calculate the 5-million-euro capital requirement based on a higher exchange rate of 60 UAH per euro. This would increase the capital requirement to 300 million UAH. If this stricter rule is adopted, 21 banks—one-third of Ukraine’s banking system (62 banks in total)—would be at risk. Sources indicate that the NBU estimates only four of these 21 banks would be able to quickly increase their capital to 300 million UAH using their current profits. The remaining 17 banks would have to seek additional funds in 2025, and if they fail to do so, they may either voluntarily surrender their licenses or face forced closure by the NBU.