28 Aug 2023 16:09

Ukraine's non-bank financial sector shows slow recovery in Q2 - NBU review

MOSCOW. Aug 28 (Interfax) - The non-bank financial sector of Ukraine underwent a variety of changes in the second quarter of 2023, with the majority of sectors reporting a growth of their assets, except for financial companies, which lost assets due to a decline in the number of such institutions, Ukrainian media said, citing the National Bank of Ukraine's (NBU) non-bank financial sector review.

Insurance companies posted profit, the review said. The volume of insurance premiums rose slightly as compared to the first quarter of the year, mainly in risk insurance. Proceeds from insurers' investment activity continued to grow.

For the first time since the start of the crisis, credit unions demonstrated signs of recovery, as their assets and loan book increased and there was marginal profit.

Furthermore, the operations of pawnshops also intensified: the volume of loans increase, their earnings grew and the profitability performance improved. Financial companies were the only segment where turnover decreased as compared to the first quarter: the volume of core financial services, except for financial leasing, dropped.

The number of entities providing non-bank financial services continued to decline in the second quarter of 2023: 38 financial companies, eight legal entities acting as lessors, seven insurers, seven pawnshops, and six credit units were removed from the Register of such organizations, the NBU said. The majority of these financial institutions left the market, terminating their licenses of their own volition.

Apart from that, under Ukraine's law on financial services, 16 financial companies were removed from this Register and were added to the Payment Infrastructure Register as payment institutions. A financial company and a lessor legal entity were registered in April-June.

Eighteen financial companies and five insurers relinquished some of their licenses of their own volition during the second quarter of the year. Only one financial company had some of its licenses annulled at the NBU's decision.

When outlining the non-bank financial sector's prospects and risks, the NBU underscored the law on credit units, which was adopted in Ukraine in July 2023 and will help raise the efficiency, financial sustainability and reliability of such organizations. In this connection, credit unions ought to get ready to embrace a new risk-oriented regulatory approach and to adopt an early warning risk system for rapid potential stress response.

Furthermore, the regulator approved a factoring regulation reform concept, which draws a line between trade factoring and financial liability deals and introduces state registration of an assignment of receivables, a move that will help deepen the market and will contribute to its transparency.

On-site inspections of non-bank financial service providers in the field of financial monitoring, sanctions legislation and forex oversight were resumed in August as well, the NBU said.