Banks Are Weathering the Impact of the War, but the Main Challenges Are Still Ahead — Experts

Ukraine’s banking system has maintained financial resilience amid the full-scale war and its ability to operate even during large-scale power outages. However, the next major challenge will be expanding lending, without which a full-scale economic recovery will be extremely difficult. This will require addressing a number of issues related to war risks, bank taxation and attracting investment.

This was discussed during a podcast on the Finance.ua YouTube channel by Serhii Mamedov, Vice President of the Association of Ukrainian Banks and Chairperson of the Management Board of GLOBUS BANK, and Vasyl Furman, Member of the Council of the National Bank of Ukraine.

According to Serhii Mamedov, over the years of the full-scale war, Ukrainian banks have not only adapted to extremely challenging conditions but have also significantly strengthened their financial position.

“The banking system has become better capitalised, more profitable and has genuinely changed during the war. The level of liquidity currently available in the financial system simply did not exist before,” Serhii Mamedov emphasised.

At the same time, Vasyl Furman noted that Ukraine’s banking sector is currently one of the strongest sectors of the economy. Its ability to ensure uninterrupted customer service amid missile and drone attacks and energy crises has been an important confirmation of its resilience.

“The banking sector is currently one of the strongest sectors of our country. We can operate during a blackout,” Vasyl Furman noted.

He recalled that the POWER BANKING network, launched by the NBU back in 2022, ensures that bank branches can continue operating in the absence of centralised electricity supply. According to him, more than 2,500 branches across Ukraine can operate under such conditions.

At the same time, the participants of the discussion pointed out that banks’ financial resilience does not yet translate into a sufficient level of lending to the economy. Despite positive growth in loan portfolios, the ratio of loans to GDP remains low, while a significant share of businesses still do not use bank financing.

According to Serhii Mamedov, stimulating lending requires finding a balance between banks’ capital requirements, financial stability and the needs of businesses operating under constant war-related threats.

“We need to find a compromise that will make it possible to increase lending. Without lending, it will be very difficult to rebuild the economy,” the banker emphasised.

One of the most controversial issues was the possible extension into 2027 of the increased 50% corporate income tax rate for banks.

Serhii Mamedov highlighted the contradiction between the state’s intentions to reduce the share of state-owned banks, attract international investors and, at the same time, maintain the increased tax burden on the banking sector.

“I believe that this is precisely what discourages international capital from entering the banking and financial system,” he noted.

For his part, Vasyl Furman emphasised that the National Bank also does not support extending the increased taxation of banks.

“The National Bank does not support increasing taxation. This is the official position of the National Bank,” said the NBU Council member.

According to his assessment, extending the increased taxation could potentially generate around UAH 20 billion in additional revenues for the state budget. However, retaining these funds within the banking system could create opportunities for an additional UAH 200–300 billion in lending, including to businesses, the defence industry and the energy sector.

The participants of the discussion also paid particular attention to war-risk insurance. In their view, without a comprehensive mechanism for such insurance, banks will continue to factor in the high risks of damage to or destruction of business assets, which will constrain the expansion of lending.

Serhii Mamedov noted that government programmes, including “Affordable Loans 5-7-9%” and state guarantees, are already helping businesses obtain financing. However, significant development of the lending market requires additional instruments to protect against war-related losses.

Vasyl Furman emphasised that effective insurance would not only protect borrowers but also reduce risks for banks, creating conditions for lending growth and lower borrowing costs.

Another important topic of the discussion was macroeconomic stability, including the situation in the foreign exchange market, inflation risks and the role of international financial support.

Serhii Mamedov suggested that the US dollar exchange rate could be around UAH 46 at the end of 2026, potentially slightly exceeding this level. In his view, even amid the current increase in war-related and economic risks, there are no grounds to expect a sharp depreciation of the hryvnia.

Vasyl Furman noted that under the “managed flexibility” policy, it is impossible to predict the exact hryvnia exchange rate at the end of the year, as it is determined by the balance of supply and demand. However, he believes that the situation in the foreign exchange market will remain under control.

Experts identified the NBU’s international reserves as one of the key factors supporting currency stability. The discussion noted that their volume currently stands at around $47 billion, while under a favourable scenario it could increase to $70 billion by the end of the year. At the same time, the National Bank continues to conduct significant foreign exchange interventions, with their volume recently reaching $1–1.2 billion per week.

“The volume of foreign exchange reserves directly depends on how regularly and fully Ukraine receives external financing,” Vasyl Furman explained.

According to him, Ukraine is expected to receive around $54 billion in international financing in 2026, although the timeliness of these inflows directly depends on fulfilling commitments to international partners, including the adoption of the necessary legislative decisions.

Serhii Mamedov emphasised that even if the volume of reserves is lower than forecast, the National Bank will still have sufficient capacity to maintain a controlled situation in the foreign exchange market. In his view, international financial assistance remains one of the key factors underpinning the country’s economic resilience.

Vasyl Furman also noted that after the end of the war, Ukraine will have significant opportunities to attract international capital and rebuild its economy. However, the realisation of this potential will depend on the pace of reforms, the development of the financial sector and further European integration.

“After the war, significant funds will indeed flow into Ukraine, but the window of opportunity will be quite short. It is extremely important for us to make use of this time: structurally transform the state, carry out the necessary reforms and join the European Union. I very much hope that, after all the challenges it has faced, Ukraine will be able to develop successfully and, over the next 10–20 years, catch up with Eastern European countries in terms of key economic indicators”, Vasyl Furman concluded.