Standard & Poor's Ratings Services said today that the Ukrainian banking system is under threat of disruption if the current political crisis is prolonged and escalates, which could begin to negatively affect macroeconomic stability.
"The economic and industry risks pertaining to the banking system of Ukraine (B+/Stable/B) are very high and take into account economic and market turbulence," said Standard & Poor's credit analyst Alwin Greder. A prolonged political crisis could severely test the banking system's liquidity, however. Although the improved macroeconomic environment has benefited the banks' financial position in recent years, any reversal of this trend would be detrimental. The situation in Ukraine has not yet had any impact on the ratings on PrivatBank (B-/Stable/C).
"We are closely monitoring both the banks' liquidity and the extent of cash withdrawals from the banking system, and the payments system," continued Ms. Greder. The National Bank of Ukraine (NBU; the central bank) and the Association of Ukrainian Banks have called upon banks to maintain a normal functioning of the banking system and to meet all their liabilities. The NBU has committed to provide sufficient Ukrainian hryvnia (UAH) and dollar liquidity to the market, and has intervened to keep the hryvnia stable.
On Nov. 26, 2004, Standard & Poor's commented that the political crisis in Ukraine, triggered by the recent disputed presidential elections, had so far had no negative effect on the sovereign credit rating. Standard & Poor's continues to closely monitor developments that could impair Ukraine's credit quality, however. For further information, please see Standard & Poor's commentary media release entitled "Ukraine's Political Crisis Has No Effect On Ratings Yet", published by Standard & Poor's sovereign ratings team on RatingsDirect.