Twenty Years of Ukraine’s Banking System: Major Crises, Reforms and Modern Stability
The Ukrainian banking system over the past two decades has gone from wild growth to cleansing, from Western capital expansion to massive crises, painful reforms, and the beginning of the technological maturity phase. Each of these stages has left a deep imprint not only on the market but also on society. Today, on the threshold of 2025, the financial sector looks the most resilient and structurally transformed in the modern history of the country.
The beginning of the new millennium in Ukraine was a period when banks appeared like mushrooms after rain. By 2005, the number of financial institutions had reached 165. At that moment, powerful foreign capital was entering Ukraine. Raiffeisen Bank International acquired Aval for a record $1 billion for that time. The French BNP Paribas bought 51% of Ukrsibbank and later brought its stake almost to 100%. Hungarian OTP became the owner of Raiffeisenbank Ukraine, and Italian UniCredit acquired a controlling stake in Ukrsotsbank, paying over $2 billion for it.
At the same time, banks were competing for the customer, developing mortgage, car, and consumer lending. Up to 50% of loans were issued in foreign currency. This very “foreign currency lending” would later become the main trigger for the banking and currency crisis.
Global Financial Crisis and Systemic Turbulence (2008-2009)
The global financial crisis of 2008 struck Ukrainian banks hard. The devaluation of the hryvnia from 5 to 8 per US dollar triggered a wave of non-performing foreign currency loans. As Viacheslav Yutkin, a member of the board of directors of the National Reserve Corporation, noted, “even in the summer, when deposit rates on the market were at the level of 16-18%, Ukrprombank offered 21-23% under the guise of various promotions. This was the first signal for the market.”
The state was forced to rescue systemically important banks by recapitalizing Oschadbank and Ukreximbank by 1 billion hryvnias each. However, a number of large private banks, such as Ukrprombank, Rodovid Bank, and Kyiv, could not withstand the crisis. Several went under temporary administration and were later liquidated. Recapitalization of Rodovid Bank cost the budget 12.35 billion hryvnias, and the total cost of saving it reached 19 billion. However, the bank never really started functioning as a resolution bank.
Exit of European Players and Rising Risks (2011-2013)
At this stage, some European players gradually left the market. Commerzbank sold Bank Forum, Swedbank sold its assets to Delta Bank. Problems with credit portfolios and declining profitability forced Western banks to abandon Ukrainian assets.
The market consolidated rapidly. At that time, financial institutions often preferred lending to related parties rather than to market borrowers. This further worsened the risk structure and set the stage for future crises.
Geopolitical Shock, War, and the “Great Cleansing” (2014-2016)
Russian aggression and the annexation of Crimea in 2014 sharply deepened the crisis. The National Bank of Ukraine under the leadership of Valeria Gontareva launched large-scale reforms: stress tests, market cleansing, and related party loan audits. More than 80 banks were removed from the market. From 180 banks in 2014, by the end of 2017, only 96 remained. At that time, new principles of transparency and capitalization were laid, without which the recovery of the financial sector would have been impossible.
PrivatBank Nationalization: A Turning Point in the Market
In December 2016, the state nationalized PrivatBank the largest financial institution in the country. According to the NBU, “97% of the bank’s loans were issued to companies related to the shareholders”, and the capital shortfall was estimated at $5.5 billion. The state spent over 155 billion hryvnias on recapitalization. Since then, the government has been engaged in dozens of court cases with the former owners of the bank.
In parallel, corporate governance reforms were launched in state banks, supervisory boards were created, and a new approach to development strategy was formed.
Digitalization and the Cashless Revolution (2017-2020)
2017 was the year monobank entered the market as the first mobile-only bank without branches, setting a new service standard. By 2018, the bank crossed the milestone of a million customers and began making a profit. At this time, Ukrainians massively switched to cashless payments, mobile applications, and digital services became the basis of banking services. Even during the COVID-19 pandemic, the banking sector passed the test without mass bankruptcies, and remote work accelerated the introduction of online lending and identification.
Pandemic, the “Anti-Kolomoisky” Law, and New Challenges (2020-2021)
COVID-19 was another test for the banking system. The NBU quickly supported liquidity, banks switched to digital services, and the state passed the “anti-Kolomoisky” law, making it impossible for former owners to reclaim nationalized banks. During this period, Yakiv Smolii resigned, citing political pressure: “For all of us, this was a complete surprise… I believe that it was inadequate to the circumstances,” commented Danylo Hetmantsev, head of the parliamentary finance committee.
War, Digitalization, and a New Era of Resilience (2022-2023)
With the start of Russia’s full-scale invasion, the National Bank quickly implemented emergency measures: fixed the exchange rate, restricted foreign exchange operations, and raised the rate to 25%. A few weeks after the invasion began, 75% of the banking network resumed operations even under shelling. The NBU changed its currency policy, moving to a “managed flexibility” regime. In 2023-2024, the banking sector experienced a second wave of digitalization.
Andriy Pyshnyi directly emphasized: “The NBU did not release the exchange rate. No. We did not return to a floating exchange rate regime. We are not even considering this option at the moment, given the structural currency deficit on the market and the available international reserves at the National Bank.”
Sense Bank Nationalization and the State’s Share (2023-2025)
After sanctions against the owners of Alfa-Bank (now Sense Bank) and an unsuccessful attempt to sell, the bank came under state ownership. This again increased the state’s share in the banking sector, although government and international partner policy envisions its gradual reduction. At the same time, on October 1, 2025, the Cabinet of Ministers announced the start of preparations for the privatization of state banks the first to go are Sense Bank and Ukrgasbank. Andriy Pyshnyi himself stated:
“The share that the state owns today is situational. And the increase was forced due to the nationalization of Sense Bank. Now Ukrgasbank and Sense Bank are first in line to start the privatization process.”
Stability and Focus on the Future
As of 2025, the Ukrainian banking system demonstrates stability, profitability, and a high level of resilience even in wartime conditions. The sector’s net profit, credit portfolio quality, and capital adequacy are at record levels, although risks related to the state’s share and the concentration of the portfolio in government bonds remain.
The main trend is the move toward European regulatory standards and gradual integration into the EU financial space.
The twenty-year history of the Ukrainian banking system is a chronicle of major ups, dramatic falls, decisive reforms, and a technological revolution. Each stage from foreign expansion and crisis to digitalization and wartime resilience laid the foundation for the current sector model: structured, controlled, and focused on the future. Ukrainian banks have undergone stress tests in the worst conditions. And today they enter a new stage with experience, institutional memory, and a clear vision of development.
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