Ukrainian banks under the conditions of martial law

In the conditions of martial law, Ukrainian banks have reduced their credit activity, which is largely due not to the deterioration of the resource base, but to the increase in credit risks. State-owned banks were the most vulnerable to the shock caused by the war. There is too large a share of bank income in total interest income from securities transactions, for some banks it is so large that it is more in line with the investment bank business model. Very large investments in government securities carry the potential risk of recognition of losses and the need to form reserves in amounts that can be compared to equity. The rate of formation of reserves for such financial instruments is very slow. State-owned banks were the most vulnerable to the shock caused by the war. The main reason for unprofitability is the formation of reserves. The impact of the trade outcome is significant for state-owned banks and banks with local capital. It is supposed that the National Bank could recommend banks to set limit values of appetite for the risk of investments in securities. In order to monitor the financial condition of banks, it is suggested to use the ratio between reserve formation costs and interest income to analyze the nature of losses or profits of banks. During the war, many production capacities of the holdings were damaged and require investment expenditures for their reconstruction or some time to restore functionality, or their collateral value will be hopelessly lost. Crisis measures should include the sale of part of the assets and the relocation of production facilities. Therefore, a special program of preferential early financing of investment projects is extremely necessary for the recovery of the national economy.