The loss of operating Ukrainian banks in Q1 increased by 8.1 times y/y to UAH16.2bn ($740mn), the National Bank of Ukraine (NBU) said on April 23. "Since the beginning of the year Ukrainian banks suffered significant losses (UAH80.9bn), 80% of them were formed by insolvent banks, in which the Deposit Guarantee Fund interim administration is imposed," the NBU said in a statement. The aggregate loss of insolvent banks Nadra, Delta Bank and IMEXBANK totalled almost UAH60bn.

The negative financial result of banks formed primarily due to significant provisions for possible losses from active operations. In Q1, provisioning to reserves grew 7.2 times-fold compared to the same period last year. The bulk of the reserves was formed in February. In March, however, the rate of increase in provisioning slowed down on the background of exchange rate stabilisation.

According to the central bank, the decline in the quality of the loan portfolio, the negative effect of the depreciation of the hryvnia, risk policy and insufficient capitalisation of banks made it necessary to implement a set of stabilisation measures in the banking system. In this regard, banks received unified rules from the NBU on the organisation of internal control system aimed at improving the quality of bank risk management system.

"Banks should implement a proper assessment of risks and form sufficient reserves to offset potential losses," said the statement. "Banks, in which there is a disruption of activities, should develop and submit to the National Bank the detailed plan of implementation of commitments to address them, to consider possible ways to increase the capitalization of banks and improve the quality of their assets."

The consolidated loss of Ukrainian banks reached UAH53bn ($2.3bn) in 2014, while in 2013 those banks saw a consolidated profit of UAH1.4bn. The central bank said that losses at insolvent banks and temporarily administered banks affected overall banking operations.