This chapter provides recommendations to strengthen Ukraine’s financial system framework. It contains four sections. The first focuses on developing domestic capital markets by encouraging greater household and institutional investor participation, attracting foreign investors, increasing activity in equity and bond markets, and pursuing alignment with global standards. The second section recommends strengthening the banking sector by gradually privatising some state-owned banks and managing banks’ level of exposure to the state. The third section focuses on increasing access to finance for businesses and households by reforming the state financial support programmes, increasing the availability and use of trade finance and related instruments, strengthening the mortgage market, and addressing supply-side constraints in the construction sector. The fourth section suggests measures to continue encouraging responsible digital innovation in the financial sector and developing the framework for sustainable finance.
Stronger Financial Markets and Institutions for Ukraine’s Recovery
Abstract
A well-functioning financial system is fundamental for a strong economy. This is even more important for a country at war that needs to mobilise large amounts of private financing from domestic households and businesses, as well as international investors, to face the costs of defence and reconstruction. This is why Ukraine must prioritise policy measures to increase the resilience and efficiency of its capital markets and financial institutions, which will play a crucial role both during the war and in the post-war recovery.
Ukraine’s financial sector has remained resilient during four years of full-scale war, due to prudent policy-setting and continued support from international donors and partners. However, as described in the report Mapping Ukraine’s Financial Markets and Corporate Governance for a Sustainable Recovery (OECD, 2025[1]), persistent challenges may impact the post-war reconstruction and recovery. In this context, this chapter provides policy recommendations covering four broad themes: fostering capital markets; strengthening the banking sector; supporting access to finance for businesses and households; and developing the sustainable finance and digital finance frameworks.
Note: The definitions of short, medium and long for the implementation timeline are provided in Section 1.2.1 of Chapter 1.
Ukraine’s financial system has remained resilient over four years of full-scale war. This achievement reflects the Ukrainian government’s prudent policy-setting, as well as strong support from international donors and partners. Despite very high uncertainty, continuing financial stability has supported investors’, businesses’ and citizens’ confidence.
However, Ukraine’s financial system faces enduring challenges that may impact the post-war recovery. This includes shallow domestic capital markets and a low usage of financial market instruments by firms and households. The war has further reduced the depth and liquidity of markets, while forcing a shift in priorities towards short-term stability and financing essential wartime needs. However, it remains important not to lose sight of longer-term reform imperatives. The commitment of the Ukrainian authorities to modernisation, underpinned by guidance and technical assistance from international partners, will set the foundation for recovery and future convergence with European standards.
Ukraine’s vibrant digital economy offers an encouraging perspective in this regard. The country’s technological capabilities, showcased by rapid advances in areas such as fintech and military innovation, highlight an ability to mobilise scarce resources effectively and deliver under extreme conditions. An example is the “Power Banking” initiative, allowing banks to continue providing retail banking services even during power cuts caused by missile attacks (NBU, 2022[2]). This adaptive capacity will be valuable for the post-war period, when Ukraine will need to rebuild, attract investment, and create sustainable pathways for growth. Harnessing digital finance could enable Ukraine to leapfrog traditional development stages and accelerate integration into the European financial ecosystem.
This chapter builds on the challenges and reform priorities identified in the Mapping Report (OECD, 2025[1]) and provides targeted recommendations to strengthen Ukraine’s financial system framework. It concentrates on four key areas:
Developing domestic capital markets and fostering deeper integration into European and global markets.
Strengthening the banking sector to ensure financial stability and enhance the capacity of banks to finance reconstruction.
Supporting access to finance by reforming state subsidy and guarantee schemes while expanding the range of private sector instruments.
Developing the sustainable finance and digital finance frameworks.
Progress in these areas will also depend on broader reforms to strengthen the rule of law and business integrity (OECD, 2025[3]), which are indispensable foundations for open, competitive, and resilient markets.
Capital markets are essential for a diversified and stable financial system that contributes to long-term growth. They can act as shock-absorbers as well as accelerators of development by efficiently allocating resources.1 Additionally, they complement bank financing and can help leverage domestic and international capital. For Ukraine’s long-term growth, a deep and efficient capital market will be of central importance. Vast amounts of capital will be needed to finance the reconstruction of the economy, which the banking sector and official support may not be able to provide on their own.
Ukraine’s capital market faces multiple constraints. First, there is a structurally low domestic demand for financial assets, both by households and by institutional investors, and limited engagement by foreign investors. Second, the availability and liquidity of investable private financial instruments is low. Third, the capital market is fragmented, with room for improvement in terms of institutions, legislation and oversight (discussed further in Chapter 3).
This section provides recommendations to:
foster household savings in capital market instruments
support the role of institutional investors
attract foreign investment
reform the legislation of investment funds
revitalise equity markets
increase trading activity in the secondary market
align capital market regulation with international standards.
The recommendations in this chapter are complemented by recommendations in Chapter 3 that focus on strengthening Ukraine’s capital market infrastructure – including further integration with EU capital markets – and improving the regulatory framework for stock markets and listed companies.
2.2.1. Foster household savings in capital market instruments
A key constraint for the development of Ukraine's capital market lies in low household incomes and high-income inequality (OECD, 2025[4]). Policies promoting increased private savings and trust in the financial system should aim to support broad-based financial inclusion. Incentives for the usage of long-term savings accounts is one measure that could help promote capital market development, as well as contribute to greater financial literacy (OECD, 2023[5]). However, pecuniary incentives such as tax incentives create additional fiscal costs which need to be minimised at least in the medium run to prioritise the most efficient measures to achieve the state’s targets in defence and reconstruction.
A large share of Ukrainian households holds bank deposits and cash savings both in local and foreign currency, while their holdings of securities is very low (Figure 2.1).2 One reason is the relative attractiveness of cash and bank deposits from a risk perspective. Under martial law, all bank deposits of individuals are fully guaranteed by the Deposit Guarantee Fund of Ukraine (DGF). In addition, all deposits in state-owned banks can be seen as being implicitly backed by the state to some degree, which may provide additional equity if needed to maintain stability. This implicit guarantee further reduces household incentives to shift savings from deposits into higher-risk market instruments.
Increasing retail investors’ usage of various types of financial market instruments will require building trust in financial institutions and the rule of law. This could be achieved through government programmes to increase the transparency of the financial system and public campaigns to increase individuals’ awareness and trust in financial services and financial literacy.3 The OECD’s work on financial education in Poland is an example of a government-led initiative aimed at improving financial literacy and promoting more active participation of households in financial markets (OECD, 2023[6]). Measures to improve financial literacy are covered in more detail in Chapter 5. An important underlying factor of the lack of trust in the financial system, which remains outside the scope of this report, is the functioning of law enforcement and the judicial system, which also require strengthening.
Notes: The values denote the share of surveyed individuals responding by yes.
Source: Consumer and Business Research (CBR), CBR Regular Banking Services Usage Survey 2024
2.2.2. Support the role of institutional investors
The Ukrainian capital market is characterised by a low involvement of institutional investors such as pension funds and insurance companies. While this challenge is common to many countries, it is especially acute in Ukraine. This results in weak structural demand, particularly for long-term financial instruments. Greater demand would enable the government to extend the maturity profile of its sovereign debt (see Chapter 4 on public debt management). It would also help stimulate the market for corporate bonds and equities. In addition, lengthening the maturity profile of sovereign bonds would likely support the issuance of longer-term corporate bonds as they can serve as liquid benchmarks.4
Expanding the pension fund and insurance sectors is a long-term endeavour but it is essential to the development of domestic capital markets. Measures are therefore needed to support the growth of these sectors, for example by supporting the development of life insurance products, which will increase the structural demand for long-term bonds. A potential measure to achieve this are tax deductions for individuals investing into pensions funds or life insurance contracts. However, these should be limited and specifically targeted to avoid significantly lower tax receipts. In the area of pension funds, a reform should aim to promote asset-backed pension schemes (see Chapter 6).
2.2.3. Attract foreign investment
The third priority to strengthen demand for capital market instruments is enhancing the attractiveness of the Ukrainian market for foreign capital. At present, market participants view foreign exchange controls as a key barrier to deeper foreign engagement. Therefore, once the war has ended, lifting foreign exchange controls will be essential to encourage greater inflows of foreign investment. However, a potential depreciation of the Hryvnia following the liberalisation could have large negative impacts on Ukraine’s fiscal situation due government debt denominated in foreign currencies. It will therefore be of great importance to proceed cautiously and only liberalise the foreign exchange market, when macroeconomic and security conditions have stabilised. Complementary measures should focus on promoting the inclusion of Ukrainian financial assets in international equity and bond market indices, as this would naturally enhance demand from international investment funds.
2.2.4. Reform the legislation of investment funds
Investment funds can play a vital role in developing the capital market and fostering economic growth by mobilising and allocating capital efficiently, improving market liquidity, and enabling long-term financing. By pooling resources from diverse investors, funds channel capital to productive businesses, infrastructure projects, and innovative companies, which strengthens financial inclusion and deepens capital markets. In the case of Ukraine, developing the investment fund sector would be valuable, as these funds:
provide low entry-cost instruments for private households to invest their savings in a diversified and professionally managed way
could complement bank financing and generate the much-needed demand for long-term financial instruments, allowing for an increased issuance of equity and corporate bonds
can help attract foreign capital to Ukraine.
Contrary to what headline figures might suggest, the Ukrainian investment fund sector is materially underdeveloped. Investment funds hold about 15% of total Ukrainian financial sector assets (excluding NBU assets), which is significant, especially when compared to the shares of insurance companies (2%) and pension funds (0.1%) (NBU, 2025[7]). However, 93% of investment fund assets under management are held by Venture Collective Investment Institutions (CII) (Ukrainian Association of Investment Business, 2025[8]). In international usage, the term “venture capital fund” is typically understood as describing funds that provide capital to innovative companies in early-stage phases. In contrast, Ukrainian venture CIIs are primarily used as lightly regulated and tax-saving vehicles for holding conventional mature businesses – especially in construction, agriculture, and finance – and are often fully owned by single individuals (Shelud’ko and Shishkov, 2020[9]).
Therefore, investment funds that pool the capital of many individuals or that allow institutional investors to benefit from diversification and specific portfolio management expertise currently play an insignificant role in the market, implying upside potential for capital market development. While the advantages of using Ukrainian venture CIIs as holding structures for conventional companies are considered valuable, it seems appropriate to design legislation that distinguishes between the different purposes of investment vehicles.
The authorities could consider redesigning the legislation to achieve higher transparency and provide optimal frameworks for the different investor groups. This can potentially be achieved within the current initiative of the Ukrainian government to align legislation on investment funds according to EU standards (NBU, 2024[10]). Because of the important role currently played by CIIs in the Ukrainian economy, reforms should be carefully adapted, minimising potential negative effects on existing business activity.
2.2.5. Revitalise equity markets
Public equity markets are crucial for fostering long-term economic growth and development (OECD, 2017[11]). Even prior to Russia’s full-scale invasion, issuance activity in Ukraine had been subdued, with many large firms opting to list shares in foreign markets (Carletti et al., 2024[12]). In the longer term, it is essential to revitalise the Ukrainian stock market by increasing issuance activity. The state can play a pivotal role by offering shares of state-owned enterprises on the stock exchange. Specifically, authorities should consider listing state-owned banks (see the section on bank privatisation below) to set a precedent and encourage private sector participation.
The listing of state-owned enterprises would also be advantageous in comparison to privately held enterprises, as the former are often perceived by investors to be less risky because of potential implicit state guarantees. Successful listings of state-owned enterprises in other Eastern European transition economies can serve as valuable examples for the Ukrainian authorities (OECD, 2022[13]). Furthermore, the comprehensive supervisory and regulatory framework for banks could also provide investors with confidence of high governance standards.
An additional consideration is the potential role of well-known “household brands” in stimulating investor interest. Recognisable domestic companies can attract a broader base of retail investors and serve as a signal of credibility for Ukraine’s capital market. Encouraging such enterprises to issue tradable securities would allow the market to leverage existing brand recognition and consumer trust. Familiarity with these firms may lead investors to perceive them as relatively lower risk, partially offsetting broader systemic concerns related to property rights and the rule of law.
Currently, it seems more attractive for Ukrainian companies to list on foreign exchanges due to limited domestic capital and trading activity. While foreign stock exchanges have the advantage of reaching a broader investor base, local equity markets should at least complement listings on foreign exchanges as they benefit from local information advantages. The authorities should therefore consider strengthening the local domestic equity market, for example by unifying the fragmented equity market into a single centralised stock exchange. In addition, the Ukrainian authorities might consider dual-listing of stocks in domestic and foreign exchanges. These themes are further discussed in Chapter 3.
2.2.6. Increase trading activity in the secondary market
Liquid and well-functioning secondary markets are of prime importance for price discovery and are a prerequisite for vibrant issuance activity in tradable equity and debt instruments (OECD, 2025[14]). In Ukraine, currently, liquidity is concentrated in the secondary market for government bonds. While the main reasons for this are likely the low outstanding amount of securities issued by private entities, and persistent challenges with investor trust and confidence, an additional factor at the margin might be their disadvantageous tax treatment as income from government bonds is exempted from personal income tax.
In the present context, with the need for large-scale spending on defence and reconstruction, it seems valuable to incentivise holding public debt instruments. Additionally, as government bonds are currently the only type of securities trading liquidly in the domestic market, worsening their situation should be avoided. In the long run however, when fiscal and economic conditions have stabilised, the authorities could consider aligning the tax treatment to support trading and issuance of private capital market securities. To make investments in bonds more attractive, Ukrainian authorities should consider simplifying the respective reporting requirements. If the authorities prefer to maintain the privileged tax treatment of government bonds, they might alternatively consider extending comparable benefits to securities issued by private entities, at least in selected cases. Such a measure, however, would need to be carefully weighed against the potential loss of tax revenue at a time of significant fiscal pressures. Additionally, the tax treatment of bond investments is considered as overly bureaucratic and time-consuming for investors.
2.2.7. Alignment of capital markets regulation with international standards
To develop its capital markets in accordance with international standards, Ukraine is aiming to align its capital market regulations with the principles of the International Organization of Securities Commissions (IOSCO) (IMF, 2025[15]). The strategy includes measures to enhance the institutional and financial independence of Ukraine’s stock market regulator and to reform market infrastructure, ensuring that state regulation meets IOSCO standards. These reforms are designed not only to increase investor confidence but also to foster transparency, market integrity, and the protection of investors. Reinforcing the institutional capacity of the regulator will likely require additional resources and a strengthening of its position (see Chapter 3).
Recommendation 1: Launch targeted public awareness campaigns to strengthen trust in financial markets and reinforce confidence in the rule of law.
Recommendation 2: Support the development of life insurance products and promote asset-backed pension schemes.
Recommendation 3: Once security and macroeconomic conditions have stabilised, gradually ease foreign exchange restrictions to encourage foreign investment and rebuild market confidence.
Recommendation 4: Redesign legislation on venture collective investment institutions to increase transparency and achieve targeted frameworks for different investment purposes.
Recommendation 5: When security and fiscal conditions have stabilised, consider aligning the tax treatment of government bonds to that of securities issued by private entities and simplify the tax treatment of bond investors.
Recommendation 6: Finalise and implement the alignment of capital market regulations with IOSCO standards, strengthening supervisory capacity and enforcement mechanisms to build investor confidence.
Despite the impacts of Russia’s full-scale invasion, Ukrainian banks have remained profitable and well-capitalised.5 However, their financing of the real economy remains relatively low compared to peer countries and the share of state ownership is high. Therefore, addressing certain issues would unlock banks’ contribution to the recovery. This section focuses on three potential areas of reform:
reducing the amount of non-performing loans (NPLs) held by banks
reducing the level of state ownership in the banking sector
reducing bank’s exposure to the state.
The first area of reform aims to enhance banks’ capacity to lend by freeing up their balance sheets. It is also related to the second area, as NPLs are concentrated in state banks. The recommendations for privatisation focus on increasing the efficiency and competitiveness of the banking sector, with a related objective to support capital market development. The third area of reform relates to refocussing the scope of the banking system on financing private enterprises and households.
2.3.1. Reducing banks’ holdings of non-performing loans
Ukraine’s banking system is characterised by a large volume of NPLs which accumulated both in the pre-war era and during the war (OECD, 2025[1]). Gradually freeing the banking sector from this exposure remains one of the top policy priorities of financial authorities. Ukraine is working on developing the secondary market for NPLs and is co-operating with the International Finance Corporation (IFC) to develop a framework to introduce asset resolution companies. This will help to build a more liquid market and remove bad loans from banks’ balance sheets, which should increase banks’ capacity to grant loans to the private sector.
After having reached nearly 40% in April 2023, the NPL ratio of the banking system has declined sharply, to 27% in July 2025. The NPL ratio for loans to individuals fell to 14%, while the ratio for business loans dropped to 35.5%. This positive trend can be observed across all groups of banks by ownership. State-owned banks have the highest ratio of NPLs at 38.5%, followed by private Ukrainian banks (9.9%) and banks with foreign capital (9.5%) (Finway, 2024[16]).
To increase transparency and further reduce the banking sector’s exposure to NPLs, the Ukrainian authorities have aligned the definition of non-performing exposures with EU Aquis. They have also agreed to take further steps to strengthen banks’ workout capacity and to promote the secondary market for NPLs in accordance with the lending development strategy approved by the Financial Stability Council (IMF, 2025[17]).
2.3.2. Reducing the level of state ownership in the banking sector
The Ukrainian banking sector is characterised by a high level of state ownership, with state-owned bank assets accounting for 52.2% of total banking sector assets as of August 2025 (NBU, 2025[18]). There are benefits to this approach in a war context, but in the longer-term, privatisation is an opportunity to bring in high-quality private capital and to increase the efficiency and financing capacity of the banking sector.
During war time, state banks play an important role in financing the defence sector and executing government programmes, as they are driven by policy mandates rather than purely commercial motives. There is also evidence that during domestic shocks, state-owned banks tend to stabilise credit growth (Panizza, 2024[19]). However, state-owned banks have also been shown to reduce fiscal discipline and to crowd out credit to the private sector, which could be particularly challenging for businesses already struggling with credit during war time (Gonzalez-Garcia, 2013[20]).
By privatising some of its state-owned banks, Ukraine could enhance efficiency within the banking sector, attract foreign capital that could stimulate competition, and generate revenues for the state while aligning with EU State Aid rules. In October 2024, Law No. 3983-IХ “On the Specifics of Sale of Stakes Owned by the State in Authorized Capital of Banks” took effect, aiming to enhance the management of state assets in the banking sector and attract investments by establishing a procedure for the sale of shares in state-owned banks (OECD, 2025[1]). The Ukrainian authorities are currently preparing Sense Bank and Ukrgasbank to be privatised.
Privatisation is a complex process that requires strong institutional and regulatory frameworks. To minimise risk and allow for correction if needed, this process should be gradual and sequential, with objectives and timelines well communicated to all stakeholders. Starting the privatisation process now would allow Ukraine to see benefits sooner. However, undertaking this process during the war might result in lower valuations for banks. Authorities will need to conduct adequate due diligence on future investors to assess their financial capacity, strategic intentions and business reputation. Additionally, they should consider whether foreign investors could help banks to be better integrated in the global financial system (OECD, 2019[21]).
The sale method will depend on multiple factors, including the bank’s financial health, market conditions, and the state’s objectives. The EU State Aid rules allow for different methods of sale. Ukraine could consider these, as they are designed to protect against market distortion while ensuring maximum transparency in the sale process. The methods include:
Listing the bank on the stock market via an initial public offering (IPO).
A progressive sale of stakes held by the state via secondary public offerings (SPOs) over time, to avoid market distortions.
The purchase of the stake by another institution via a merger and acquisition (M&A) transaction (a dual IPO and M&A is possible).
Selecting the option of listing via an IPO for the state’s stake in one or more banks may be a strong option, if Ukraine chooses to (partially) privatise one of the larger state-owned banks. It would achieve multiple objectives:
driving capital market development by listing well-known companies with a high level of governance (due to the stringent banking regulatory framework)
increasing transparency of the sale process via a public platform (stock exchange)
avoiding the risk of capture by one or more buyers (safeguarding against a concentration of economic and political power of single persons or groups).
A combination of sale methods could also be used, for example an IPO for one bank and an M&A transaction with a foreign bank for another. Independent of the sale method chosen, the regulatory framework will need to be strengthened, with the necessary authority vested and resources allocated to oversee the process (OECD, 2019[21]). In accordance with existing Ukrainian legislation (Law No. 11474 on the privatization of state-owned banks), thorough due diligence will also be required for all investors (including in an IPO listing) to avoid market concentration, market integrity issues, and acquisition by unsuitable investors. A fit and proper person test should be carried out, in line with requirements for board members (for example reflecting good character, good financial standing, and lack of ties to aggressor countries).
The experience of other countries that have carried out large-scale privatisation may provide useful lessons for Ukraine. provides one such example.
Following multiple banking crises in 1983, the Israeli government nationalised banks to prevent a systemic crisis. This resulted in a banking sector that was dominated by five banks which together accounted for over 90% of the sector’s total assets. While nationalisation contributed to stability, it also limited competition and innovation, affected the efficiency of credit allocation, and maintained barriers to market entry for potential competitors. Political involvement helped align major decisions with government priorities but may also have contributed to price distortions and less optimal capital allocation.
Approach taken to privatising banks
In response to these shortcomings, the Israeli government initiated a gradual privatisation process that began in 1993 and concluded in 2018. Banks were sold progressively and in stages, through both public offerings and private sales. Bank Hapoalim and Bank Leumi were among the first to be partially privatised in 1993, when minority stakes of 21% and 13.5%, respectively, were offered on the Tel Aviv Stock Exchange. Further divestments of Bank Leumi continued until 2005, with the final 5% sold in 2018. Throughout the process, however, government control was retained via a designated committee chaired by the Accountant General of Israel.
In addition to privatisation, the Israeli government implemented regulatory reforms aimed at strengthening corporate governance, competition and the prevention of conflicts of interest. The Central Bank administered an independent committee that appointed board members to privatised banks to lower the influence of organised shareholders. More recently, in 2022, it introduced mandatory data sharing to foster competition further.
Experiences and challenges of the privatisation process
Nevertheless, some structural challenges remain. The three largest banks continue to account for over 60% of lending and 65% of household deposits. Thus, while the system has moved from a government monopoly to a more market-oriented structure, a relatively high degree of concentration remains. While nationalisation contributes to financial stability, it may also limit competition and innovation, affect the efficiency of credit allocation, and maintain barriers to market entry for potential competitors.
The privatisation of Israeli banks was a gradual and politically complex process. The slow approach, supported by regulatory measures, allowed for better oversight and corrective actions when needed. For Ukraine, this underlines the importance that authorities should put emphasis on fostering competition as a pathway for better and more competitive banking services. High-quality and affordable banking services can play a significant role in Ukraine’s economic rebound in the immediate and short term, and in sustainable growth in the long term.
2.3.3. Reducing banks’ exposure to the sovereign
Since the start of Russia’s full-scale invasion, the Ukrainian banking sector’s absorption of a large part of new government debt issuance has played an important role in financing the government’s increased spending needs and fiscal shortfalls.6 Through its capacity of maturity transformation, the banking sector possesses a unique flexibility in smoothly absorbing financial assets. After the NBU stopped its monetary financing of government deficits in January 2023, banks became the largest holder of domestic government bonds. At end-June 2025, 26% of Ukrainian commercial banks’ assets were government bonds (see Figure 2.2). This absorption was facilitated by two factors. First, Ukrainian government bonds offer an attractive and relatively safe yield for banks. Second, over the last years, the NBU has increased the limit to which banks may cover reserve requirements using government benchmark bonds to 60% currently (IMF, 2024[22]).
Source: NBU (2025[23]), Banking Sector Review: August 2025, https://bank.gov.ua/en/news/all/oglyad-bankivskogo-sektoru-serpen-2025-roku.
In addition, banks’ deposits at the NBU (and other banks) worth 20% of total assets mirror to a large extent the NBU holdings of government bonds.7 When consolidating the NBU’s balance sheet with that of the commercial banking sector, this implies that a large part of outstanding domestic government bonds are financed by deposits held by the private domestic non-bank sector, making up about half of commercial banks’ liabilities. The resulting expansion of broad money supply, versus the counterfactual scenario of the private non-bank sectors directly holding government bonds, is not necessarily problematic. It was widespread in the years following the 2008 global financial crisis, when central banks engaged in quantitative easing creating enormous amounts of base money with no undue effect on inflation (Adrian et al., 2025[24]).
However, strong reliance on the banking sector for government financing can be problematic at least for two reasons.
Elevated holdings of government debt potentially crowd out bank lending to enterprises and households, in a context of already constrained access to finance (OECD, 2025[1]).
A high concentration of government debt on bank balance sheets creates the so-called sovereign-bank nexus, meaning that the health of the banking sector becomes closely tied to the government’s fiscal position. If the government faces difficulties servicing its debt, banks’ solvency could be threatened, potentially triggering or worsening financial crises. (World Bank, 2024[25]).
Therefore, once the war has ended, the Ukrainian authorities should consider regulatory measures to lower the amount of government debt held by the domestic banking sector over the medium term. Importantly, due to the central role banks currently have as holders of government bonds, and to avoid monetary financing, these measures must be implemented carefully. From the demand side, a possible measure would be fostering private households’ direct investment in government bonds (see Chapter 4 on public debt management).
To minimise risks to the smooth functioning of the government bond market, a gradual path to limit the banking system’s government bond holdings could be explored as security conditions stabilise. A potential measure would be to decrease the maximum share of government bonds allowed to cover minimum reserve requirements. As the banking sector is currently not constrained by reserve requirements, an alternative measure could be the introduction of a tiered risk-weighting framework penalising holdings of government bonds surpassing certain thresholds. A useful step in this direction is that from September 2025, the NBU requires that banks comply with a leverage ratio of at least 3%. Unlike capital adequacy ratios, this measure covers government bonds.
Recommendation 7: Consider listing stakes in state-owned banks on the stock market, to reduce state ownership in the banking system and stimulate the development of the capital market.
Recommendation 8: Consider regulatory and market development measures to reduce the concentration of government bonds in the banking system in the medium run.
Access to finance has been a longstanding challenge for Ukrainian businesses and households, with a large share of firms facing credit constraints prior to the war and few households using mortgages to purchase homes (OECD, 2025[1]). Bank lending remains the predominant source of financing, and lending rates increased by 38% and 22% for households and businesses respectively over the course of 2024 (IMF, 2025[15]). However, they remain relatively low compared to peer countries (OECD, 2025[1]). At the same time, there is limited non-bank credit activity in Ukraine. This section focuses on measures to improve financing conditions in Ukraine for:
businesses, by reforming the state financial support programmes and developing non-bank financial instruments, and
households, by stimulating the mortgage market and addressing supply side constraints in the housing market.
These measures are complementary to the reforms in Ukraine’s banking sector and capital markets described above, which will also contribute to improving financing conditions for businesses and households. Chapter 3 also provides a recommendation to set up a growth equity market, which would provide a complementary avenue to finance SMEs and growth companies.
The Ukrainian authorities are working on further improving policies and legislation in these areas and have been making considerable progress in recent years which is specifically reflected in Ukraine’s Lending Development Strategy, the Mortgage Development Strategy and the new Financial Sector Development Strategy. The following recommendations are meant to supplement and, in some cases, to affirm the existing measures.
2.4.1. Improving financing conditions for businesses
Reforming state financial support programmes for corporate lending
Ukraine has a range of programmes8 that aim to enhance access to finance for businesses, either by reducing costs for businesses or lowering risk for private lenders. These programmes are generally targeted at small and medium sized companies, and they are carried out in partnership with commercial financial institutions. Most of the programmes were initially introduced in response to the COVID-19 pandemic, but they have also played an important role in preventing a large-scale economic crisis and cascading business failures following the full-scale invasion.
Subsidy programmes
The first priority is to reduce reliance on subsidy programmes to stimulate market-based corporate lending. In the short term, such subsidies are justified given the very challenging financial conditions, including high risk and elevated policy rates that contribute to high interest costs. However, subsidies come with a range of risks:
Structural dependence on public support, which could crowd out the supply of non-subsidised financial products. As of end-June 2025, the share of subsidised loans in the portfolio of domestic currency corporate lending was 29.3%, down 3.5 percentage points (p.p.) from the start of the year (NBU, 2025[23]).
Potential market distortions, for example reducing competition or innovation in financial services.
High fiscal costs, in the context of severe fiscal constraints and public debt management challenges (as discussed in Chapter 4).
Economic inefficiency, whereby more loans are provided than may be necessary including to some unviable firms. This is especially true with the current design of the programmes, which have few screening criteria to check which companies are truly credit constrained.
Impact on the transmission channels of monetary policy by dissociating changes in key policy rates from business loans. This could reduce the effectiveness of inflation targeting in the future.
Ukrainian authorities are already taking measures to address these risks. The Ministry of Finance (MoF) has commissioned an independent assessment of the Business Development Fund which administers the subsidy programmes. The assessment has focused on refining the design of these programmes to ensure that they target SMEs facing challenges to access finance (IMF, 2025[17]).
In the short term, Ukraine should narrow the scope of the subsidy programmes, in an orderly and gradual way. Eligibility criteria for businesses could focus on those that:
have healthy economic fundamentals, to avoid subsidising unviable businesses
can demonstrate they have been directly impacted by the war
can demonstrate that they are unable to access or afford lending at the market rate.
As a first step, Ukraine could introduce requirements for businesses to show they have good accounting practices and a viable business model, as a basic method to filter out non-viable or poorly managed companies. Credit institutions providing the loans on behalf of the state could be responsible for carrying out this assessment.
In the short to medium term (when conditions allow), Ukraine should carry out a detailed cost-benefit analysis of providing further subsidies. Depending on the results, the subsidy programmes could either be gradually phased out or further narrowed. Two ways subsidies could be narrowed are:
Aligning the subsidy limits and related criteria with the de minimis rules in the EU’s State Aid framework (European Commission, 2023[26]). The objective of the de minimis rules is to ensure that government support for businesses does not lead to market distortions. Furthermore, aligning with the State Aid framework would contribute to Ukraine’s efforts towards transposing EU regulations as part of its accession process.
Focusing subsidies on specific economic sectors in line with government priorities, for example defence, manufacturing and agriculture. This would ensure that public spending on subsidies is focused on the sectors crucial to Ukraine’s security and economic development.
Changes to the subsidy programmes should be gradual and well communicated, to allow businesses to adjust and avoid a financing shock (OECD, 2023[27]). Ukraine could also draw on the experience of EU Member States in phasing out temporary COVID-19 subsidy programmes, and in alignment with the de minimis rules.
Guarantee programmes
The second priority is to use state credit guarantees as an alternative to subsidies. Credit guarantees can help to address several common problems that limit business financing:
Lack of collateral: Smaller companies often struggle to provide adequate collateral to be granted loans. This is especially the case for businesses directly affected by hostilities, for example those with assets in occupied regions.
Limited credit information: Many companies may not have “deep” credit histories which may make financial institutions less willing to extend loans. This is a particular challenge in Ukraine where levels of economic informality are high.
Risk appetite: Banks and other financial institutions may have low risk appetite to lend to companies, especially during wartime and given the broader constraints to bank financing (OECD, 2025[1]). Credit guarantees help to reduce actual/perceived risk and can incentivise financial institutions to lend more (European Investment Bank, 2014[28]).
Credit guarantees have certain advantages compared to interest rate subsidies. These include:
Better targeting financing barriers: as described above, credit guarantees target several barriers that businesses face, unlike subsidies which only reduce financing costs.
Risk-sharing: when a guarantee covers only part of the credit risk, financial institutions retain at least some risk. This means that they are incentivised to efficiently allocate lending to the most viable businesses.
Efficient use of public finances: guarantees require a smaller initial cash flow, meaning that the fiscal cost compared to subsidies may overall be lower and the same amount of money could allow provision of more lending (European Investment Bank, 2014[28]). Guarantees may therefore be a more efficient use of constrained public finances (Arping, Lóránth and Morrison, 2010[29]) if they are priced correctly to reflect financing costs.
As mentioned above, Ukraine’s main credit guarantee programme is the State Portfolio Guarantee Scheme, which provides an “umbrella” guarantee for participating banks’ SME lending portfolio up to a pre-defined limit. As of September 2025, 28 commercial banks were participating in the scheme. Since the programme’s beginning, 49 787 loans have been issued for a total amount of UAH 161.9 billion (MoF, 2025[30]).
In the short term, Ukraine should consider maintaining the State Portfolio Guarantee Scheme. However, the programme’s parameters must be carefully designed to manage risks (as also discussed in Chapter 4). These include:
Contingent liability management: The state faces uncertain liabilities that only materialise if a borrower defaults and the guarantee is activated. Widespread financial distress can lead to guarantees being called on, on a larger scale. Contingent liabilities should be appropriately calculated, priced and provisioned for (for example via a dedicated buffer fund and emergency credit lines, as discussed further in Chapter 4).
Costs: The cost of the guarantee, namely the risk-weighted expected amount to be paid out, must be born in some way. In many countries, the cost is exclusively covered by the state. However, guarantees can also be partly funded via fees, which can be used to fill a buffer fund as mentioned above.
Moral hazard risks: Participating banks should retain part of the credit risk (i.e. a partial credit guarantee). This will limit distortions and excessive risk-taking under the programme.
Strong legal framework: Laws and regulations should clearly define the privileges and obligations of participants in the credit guarantee programme, supervisory powers, and economic aid recovery rules. There should also be robust reporting mechanisms on the programme’s operation, overall guarantee levels, risk monitoring and budget provisioning.
Ukraine could also consider aligning with the EU de minimis rules for credit guarantees, which for example set limits on the total amount of guarantees to each company and the level of risk sharing (generally maximum guarantee of 80%). The experience of other countries with credit guarantee schemes such as Poland may be useful (see Box 2.2).
Applying an overall ceiling to the total value of guarantees issued by the government is another important measure to limit fiscal risk. As part of the IMF programme, Ukraine has agreed to a ceiling of UAH 70 699 for the issuance of publicly guaranteed debt as of March 2025, with the actual amount reaching UAH 7 839 or 11% of the ceiling as of March 2025 (IMF, 2025[17]).
In the medium term, Ukraine can also carry out a cost-benefit analysis of the credit guarantee programmes to quantify the benefits (expected additional lending and impact on GDP) as well as the costs (risk-weighted cost of contingent liabilities). This can also help to set the total amount of guarantees provided and lending conditions.
Credit Guarantees
In Poland, Bank Gospodarstwa Krajowego (BGK), an investment and development bank, issues credit guarantees to support access to finance for Polish businesses. These guarantees are provided in line with the de minimis rules under the EU State Aid framework, and they implement the Polish government’s support programme for entrepreneurs. BGK provides the guarantee, which is then applied to bank loans provided to SMEs covering working capital or investments.
BGK issued around 22% of all de minimis aid in Poland as of 2022, 98% of which was in the form of guarantees. Ninety-five per cent of these were used to secure working capital loans. As of end-June 2024, de minimis guarantees collateralised 19.1% of the value of all active loans granted to SMEs in Poland. BGK estimates that nearly PLN 137 billion (EUR 32 billion) in additional credit has been added to Poland’s economy over the 11 years of the programme’s operation. As a result, BGK estimates that the scheme has contributed to creating 188,000 new jobs and protecting 501,000 jobs at risk over the same period. Over 20% of de minimis guarantee recipients reported increasing their employment level, compared to 5.2% for all companies in the same period. Liquidity, turnover and market position of recipient companies also all markedly improved compared to a control sample.
Impacts for businesses
Two lessons learnt from the programme’s success is that de minimis guarantees are considered as easy to obtain (by around 60% of recipients), and they have filled the financing gap for firms unable to otherwise receive a loan purely on market terms (35% of recipients). A lack of sufficient collateral was the primary reason for which recipients had previously been denied a commercial loan (77.7% of recipients for working capital loans, and 61.4% for investment loans).
Source: BGK (2024[31]), Outcomes of de minimis guarantees - Report of 2024 Study, Bank Gospodarstwa Krajowego, https://www.en.bgk.pl/files/public/Raporty/Report_2024_Outcomes_of_de_minimis_guarantees_.pdf.
Developing non-bank corporate financing instruments
Public sector financing, through subsidies, guarantees or grants, will not be sufficient to fill the financing gap for businesses. Ukraine should therefore also focus on increasing the availability of a wide range of non-bank financial instruments and encouraging businesses to use them. Some instruments may be more easily introduced while others would require more time and wider reforms. However, they are likely to have more impact if they are developed and deployed concurrently. The more types of instruments are available for companies, the more companies will be able to access finance (OECD, 2020[32]).
The use of diverse commercial financial instruments could also contribute to the objectives of financial inclusion and reducing informal economic activity in Ukraine. Efforts to increase access to finance should also be complemented by financial literacy strategies for SMEs and entrepreneurs, so that they are able to use these products (see also Chapter 5 on financial consumer protection and financial literacy) (OECD, 2023[27]).
Trade financing instruments
Specialised trade financing products such as factoring and leasing respond to specific financial needs of companies and can be better suited than loans for assisting smaller companies in managing their cash flow and working capital.
Factoring contracts are effective tools to support cash flow and working capital particularly for small businesses. In addition, factoring contracts may improve firms’ access to finance, as factoring companies often consider the quality of a receivable asset rather that the firm’s credit score or history. Factoring companies may also provide related services such as debt collection and administrative services (OECD, 2020[32]).
To date, factoring activity has remained low in Ukraine. As of 2023, the penetration rate of factoring (as a percentage of GDP) stood at 0.4%, well below peer countries in the region, where they ranged from 2% in Latvia to 14% in Poland (Table 2.2). One of the reasons is that Ukraine until recently lacked a dedicated legal framework for these complex financial contracts, although general financial laws allowed for basic forms of factoring. In response, the President of Ukraine signed law No. 12306 on factoring (the “Factoring law”) in July 2025. The Factoring law was developed with support from the EBRD (NBU, 2025[33]), and aligns with the leading international standard, the UNIDROIT Model Law on Factoring (CMS Law-Now, 2025[34]; UNIDROIT, 2023[35]).
Source: Turkish Association of Financial Institutions (2025[36]), Reports of Annual Factoring Sector, https://www.fkb.org.tr/reports-and-publications/reports/reports-of-factoring-sector/. Eurostat (2025[37]), Gross domestic product and main components, https://ec.europa.eu/eurostat/databrowser/view/NAMA_10_GDP/default/table?lang=en.
Leasing can also help companies invest in and use productive assets, even where they are not able to purchase it outright (OECD, 2020[32]). This can be the case when companies do not have sufficient liquidity, collateral or creditworthiness to finance the purchase through debt. Leasing activity in Ukraine has been strongly affected by the war (Figure 2.3 Panel A). The total volume of leasing activity dropped sharply following the full-scale invasion and has since picked up, but well below the pre-war level. The penetration ratio of leasing in Ukraine is also low, dropping from 0.2% of GDP in Q4 2021, to 0.08% in Q1 2025. For comparison, the penetration ratio in peer countries in 2019 ranged from 1.23% in Serbia to 4.2% in Estonia (Panel B).
Source: NBU (2025[38]), Non-bank Financial Sector Review, https://bank.gov.ua/en/news/all/oglyad-nebankivskogo-finansovogo-sektoru-traven-2025-roku; World Bank (2025[39]), Global Financial Development Databank, https://databank.worldbank.org/source/global-financial-development/Series/GFDD.OI.17.
In the short term, Ukraine should finalise the implementation of the new factoring law. This should be accompanied by awareness-raising among businesses of factoring, leasing and related trade finance products. The level of uptake of these products is low, so efforts to understand the reasons would also be valuable. Reasons may include a low level of awareness among firms, high levels of informal economic activity preventing the use of formal financial products (Voronova, 2023[40]).
Other related regulatory or policy measures should also be considered (OECD, 2020[32]). These include:
Strengthening the rule of law and judicial system: The ability to efficiently enforce debt collection and resolve disputes linked to factoring, leasing and related instruments increases their viability. This includes both out-of-court settlement procedures where appropriate, and a well-functioning court system for disputes.
Ensuring appropriate supervisory practices: Supervisory requirements should help to effectively manage risks while not stifling market entry for new financial companies. A particular feature to consider is how to set capital adequacy requirements, based on the level of systemic risk of these firms, while ensuring that such requirements do not make factoring or other trade instruments commercially unviable (IFC; SECO;, 2023[41]). Certain amendments to the definition of capital adequacy based on supervisory practice have already been adopted by the Ukrainian authorities and came into force in January 2026.
Implementing a sound fiscal framework: Clear tax treatment of factoring, leasing or related instruments will encourage uptake by businesses. Furthermore, there should be equal treatment with loans and other debt instruments (OECD, 2023[27]). For example, if firms can deduct loan interest payments from their taxes, similar deductions could be considered for factoring, leasing and related instruments (OECD, 2020[32]).
Improving the quality and availability of credit information: This ensures that factoring and other financial companies can evaluate the quality of accounts receivable by assessing the likelihood of delayed payments, default or bankruptcy of debtors. Currently, the credit registry landscape in Ukraine is fragmented, with multiple credit bureaus in operation. Proposed legislative amendments for credit registries are yet to be adopted by the Verkhovna Rada.
2.4.2. Supporting housing finance
Ukraine’s housing sector has been hard hit by the war. As of end-2024, an estimated 13% of the total housing stock has been damaged or destroyed, affecting over 2.5 million households (World Bank et al., 2025[42]). The total cost of damage amounts to USD 57 billion or 33% of total war damage. A range of support measures have been introduced for affected households, including compensation, emergency housing and international financial support for reconstruction.
Mobilising private financing for housing will be a top priority during the post-war reconstruction and will also contribute to economic development. Across OECD countries, the construction sector generates around 6% of GDP on average, and access to (or absence of) affordable housing can impact social mobility, labour markets and productivity (OECD, 2023[43]). This section provides recommendations to support households’ access to affordable housing, by strengthening the mortgage market and leveraging public and private finance to increase housing supply.
It is essential to acknowledge that the situation of the Ukrainian real estate market is complex and subject to market inefficiencies, and a lack of transparency and investor confidence. While the recommendations of this report focus on financial aspects, the regulatory and institutional aspects are just as important to address.
Strengthening the mortgage market
Ukraine’s mortgage market is underdeveloped and largely reliant on government subsidies. Following the full-scale invasion, virtually all new mortgage lending ceased and only resumed from late-2022 onwards (Figure 2.4, panel A). Since then, almost all new mortgages have been issued via the “eOselya” subsidised mortgage programme. Around 96% of the mortgage stock is under the eOselya programme as of June 2025 (NBU, 2025[44]). These mortgages are provided at a fixed rate of 3% to certain categories of borrowers (such as military personnel and security forces, teachers, doctors, scientists), and 7% for other first home buyers.9
The eOselya programme’s objective is to provide affordable loans in the context of high interest rates. Eleven banks participate in the programme as of December 2024 (NBU, 2024[45]). It is the main policy intervention to support housing affordability in Ukraine. However, it has recently faced a lack of funding. While the eOselya programme has supported demand for mortgages during the war, the market remains small with the mortgages-to-GDP ratio reaching only 0.4% in December 2024.
Authorities should be mindful of the potential distortions caused by demand-side policy measures to promote housing affordability, such as the eOselya programme. The major risk is inflating house prices if demand stimulus is not met by an increased supply of housing. Ukraine has indeed experienced strong growth in house prices since 2019, both in the primary and secondary markets (panel B). Other risks include:
limited effectiveness as subsidies may not address other financing barriers for lower-income households10
increased fiscal burden in a context of highly constrained public finances
equity concerns where some households are eligible for discounted mortgages and others are not
crowding out of market-based mortgage lending, and
impacting the transmission channels of monetary policy by reducing the impact of policy rate adjustments.
Sources: NBU (2025[46]), Financial Stability Report June 2025, https://bank.gov.ua/admin_uploads/article/FSR_2025-H1_eng.pdf; State Statistics Service of Ukraine (2025[47]) , Housing market price changes, https://stat.gov.ua/en/explorer?urn=SSSU%3ADF_PRICE_CHANGE_HOUSING_MARKET%2811.0.0%29
In the short term, Ukraine should consider better targeting or phasing out the eOselya programme, while addressing barriers to the development of the mortgage market. Priorities include:
increasing financial literacy, so that households fully understand the characteristics and implications of mortgage contracts and can make more informed decisions (see also Chapter 5 on financial literacy)
reducing economic informality to improve “bankability” for many households
enhancing the quality and availability of credit information so that lenders can assess and price default risk
striking the right balance between protecting mortgage lenders and borrowers, as overly strong protections of either group can discourage mortgage lending (OECD, 2021[48])
addressing weaknesses in the institutional and legal framework (OECD, 2025[4]).
The authorities have already begun to act in this regard. On 18 July 2025, the NBU published a Strategy for the Development of Mortgage Lending, developed based on a concept agreed with the IMF (NBU, 2025[44]). The strategy proposes a range of measures including:
amending legislation to reduce the level of credit, construction and other risks related to mortgage transactions
improving transparency and information on the state of the housing market, for example introducing a database of real estate prices
strengthening creditor rights.
In the medium term, once private mortgage lending becomes more widespread, Ukraine should consider introducing regulatory limits such as Loan-to-Value (LTV) or Debt-Service-to-Income (DSTI). There are currently no regulatory limits, however banks generally set criteria as part of their internal lending policies. The eOselya programme also has a minimum deposit requirement, which acts like an LTV limit. As of Q3 2024, the average DSTI level of new mortgages was 32% (NBU, 2024[45]). Introducing regulatory LTV and DSTI limits, in line with common practices including 23 EU and EEA countries (Asplund, 2022[49]), would help to avoid risks of over-indebtedness and related financial stability risks in the long term (OECD, 2023[43]). The application of this instrument is foreseen in the NBU’s macroprudential policy strategy and remains under consideration by the NBU (NBU, 2025[50]).
Stimulating financing for housing construction
The primary policy objective is to increase households’ ability to access quality housing, in particular vulnerable groups such as internally displaced persons (IDPs) and veterans with more constrained financial situations. Emphasis should therefore be given to addressing supply side constraints, through instruments to finance construction of new housing. Government support to stimulate construction will be a more efficient use of public finances for the construction than mortgage subsidies.
Financing for social housing
In parallel with private sector financing, the state can dedicate financing to the construction of housing, especially social housing destined for lower-income or vulnerable groups such as IDPs and veterans. In order to avoid market distortion or crowding out of private financing, Ukraine can consider aligning with the EU State Aid rules relating to “services of general economic interest” (SGEI) and “social services of general interest” (SSGI). The SGEI and SSGI rules set criteria for public financing of activities provided for social and public interest purposes, including social housing. Financial support can be issued in the form of guarantees and interest rate subsidies (see Box 2.3).
Government investment can also be used to provide social housing at a reduced cost. Schemes such as rent-to-buy can allow households with more modest incomes to access affordable housing with the possibility of future acquisition. Such measures may be better suited for supporting vulnerable groups than subsidised mortgages.
Finland uses a combination of subsidies and guarantees to finance social housing construction and facilitate access to affordable housing.
Subsidies and guarantees largely target social housing construction
The government provides interest rate subsidies both to stimulate social housing constructions, and to reduce the cost of mortgages mainly for first-home buyers. As of June 2024, the total portfolio of subsidised loans stood at EUR 22.4 billion or approximately 8% of GDP.11 Of this total, loans worth 17.7 billion were provided to support construction of social housing (rental and right-of-occupancy), while the remaining 4.7 billion were to reduce mortgages of owner-occupied housing. In other words, the subsidised loan portfolio is around 3.8 times larger for social housing construction (increasing supply) than for general owner-occupied housing (supporting demand).
Finland also provides state guarantees which provide security in the case of borrower default. Under these guarantees the state covers any shortfall after other debt collection is completed (“deficiency guarantee”). As of June 2024, the total portfolio of guaranteed loans was EUR 20.2 billion or approximately 7% of GDP. Like for subsidised lending, a higher proportion of guarantees are provided for social housing construction, totalling 18.5 billion, than for mortgages on owner-occupied homes, at 1.7 billion. In other words, the stock of guaranteed loans to stimulate supply (construction) was 10 times greater than guaranteed loans to support demand (mortgages).
Institutional arrangements
The Centre for State-Subsidised Housing Construction oversees the provisions of loan guarantees and subsidies. The subsidies are provided to municipally owned and a select number of non-profit construction companies. The loan periods for social housing construction can be up to 41 years, significantly longer than private bank loans.
The largest provider of state-subsidised financing for social housing is Municipality Finance (MuniFin), a credit institution owned and controlled by local Finnish municipalities. MuniFin acquires its funding from international capital markets, while its guarantees are provided by the Finnish Municipal Guarantee Board. Half of MuniFin’s loan book consists of social housing financing loans, and the other half are preferential loans to municipalities and other public sector entities. MuniFin is the largest provider in the social housing loan scheme.
To ensure a level playing field and avoid market distortions, Finland applies the EU’s State Aid rules. Most subsidies and guarantees provided for social housing are issued under the “Services of General Interest” framework. This framework recognises the public interest objectives of state support for social housing and exempts such support programmes from pre-approval by the European Commission.
Positive impacts and challenges of Finland’s housing finance framework
Finland’s approach to housing finance (in particular, social housing) has contributed to a steady supply, with between 7 000 and 9 000 social housing units built annually. It has also had an impact for the most vulnerable, with the number of homeless individuals dropping more than three times between 2008 and 2023. Finland has been the only EU country to achieve a continuous decrease in homelessness levels over the past three decades (Y-Säätiö, 2026[51]).
At the same time, the use of subsidies and guarantees also poses challenges and risks, including:
Contingent liability: The housing guarantee portfolio has been constantly growing since 2008, when direct government lending was discontinued. This gives rise to increasing contingent liabilities.
Geographic concentration: In Finland, the single most important risk factor is the economic development of the Helsinki area, as the majority of the overall guarantee portfolio for housing is allocated there.
Sources: Ministry of Finance of Finland (2025[52]), Overview of Central Government Risks and Liabilities : Autumn 2024, https://julkaisut.valtioneuvosto.fi/items/5f2f7fcb-1f81-48ba-aff9-de589b47432a. MuniFin (2024[53]), Affordable social housing sector, https://www.kuntarahoitus.fi/en/who-we-finance/affordable-social-housing. Boone and Courdène (2021[54]), Finland’s Zero Homeless Strategy: Lessons from a Success Story, https://oecdecoscope.blog/2021/12/13/finlands-zero-homeless-strategy-lessons-from-a-success-story/.
War risk insurance
De-risking instruments can support further private sector investments by reducing the level of risk inherent to the war context. These instruments can include political and/or war risk insurance, which generally benefit from at least partial government support via interest rate subsidies or guarantees (Carletti et al., 2024[12]). Measures to manage war-related risks are also crucial to support both demand for new housing and a functional construction sector (NBU, 2024[45]).
The EBRD has introduced a war risk insurance facility, whereby Ukrainian insurance companies provide war risk policies backed by the EBRD’s Ukraine Recovery and Reconstruction Guarantee Facility (EBRD, 2025[55]). The Facility provides guarantees, issued to participating global reinsurance companies, allowing local Ukrainian insurers to benefit from reinsurance coverage from abroad. The facility focuses on transport and freight activities.
In the short term, Ukraine should continue working with international partners to increase the availability of war risk insurance products, drawing on donor support such as the EBRD Facility. Providing war risk insurance for housing construction will contribute to overcoming risk aversion caused by Russia’s ongoing strikes against infrastructure and civilian targets.
Addressing other barriers to housing construction
Other identified constraints to efficient housing construction should also be tackled, such as weak creditor protections, administrative or regulatory barriers to construction, and low transparency on the primary market (Carletti et al., 2024[12]).
Recommendation 9: Progressively narrow the scope of state subsidies for business loans and carry out a cost-benefit analysis in the medium term to determine whether they can be phased out.
Recommendation 10: Consider a wider use of credit guarantees to stimulate corporate lending, while carefully calibrating coverage ratios, eligibility criteria and risk sharing in line with best practices.
Recommendation 11: Advance liberalisation reforms to foster the development of trade financing instruments, starting with the full implementation of the factoring law.
Recommendation 12: Consider better targeting or phasing out the eOselya programme while addressing other barriers to the development of the mortgage market.
Recommendation 13: Consider introducing prudential limits for mortgage borrowing, such as loan-to-value or debt-service-to-income in line with international best practice to safeguard financial stability as the non-subsidised mortgage market develops.
Recommendation 14: Address housing market supply constraints by increasing public investments in social housing, expanding access to war risk insurance, and developing mortgage lending.
2.5.1. Promoting responsible digital innovation in the financial sector
Digital innovation plays an important role in increasing efficiency, diversifying market offerings for financial consumers, and contributing to financial sector development. Technologies such as AI, as well as new business models such as those of FinTechs, can have a disruptive but positive effect on financial markets. At the same time, they can pose significant risks for financial stability, as well as other risks such as bias, discrimination, and lack of explainability, etc. (OECD, 2024[56]). Frameworks that allow the safe testing of AI innovations can help to manage these risks, while harnessing the opportunities they present.
The NBU launched a Regulatory Sandbox in 2023, aiming to promote the development of FinTech and innovative products in the financial and payment markets (NBU, 2023[57]). The Sandbox seeks to harness digital innovation in a responsible and safe manner, while managing any potential risks to markets and consumers. Currently, the sandbox is limited to providers of financial or payment services authorised by the NBU, and to innovative products that can demonstrate “significant outperformance” compared to similar products, while not being subject to any legal restrictions in Ukraine. Currently, financial services providers regulated by the NSSMC and offering retail investment services, retirement savings and pension products, are not able to participate (OECD, 2025[1]).
While innovation facilitators such as the NBU Regulatory Sandbox can contribute to a more competitive and innovative financial system in Ukraine, they also pose challenges. This includes the risk of regulatory fragmentation or inconsistency across different financial sub-sectors, as well as potentially creating an unequal playing field between businesses (OECD, 2025[58]). Limiting participation in a sandbox to only a limited number of firms could reduce its potential to spur innovation, while also excluding other innovative firms. Ukraine could therefore consider allowing financial market participants not regulated by the NBU to participate in the sandbox. This could be achieved through a co-operation framework with the NSSMC, to extend the eligibility criteria to firms regulated by the NSSMC. Other countries have established such a framework, for example India’s Inter-operable Regulatory Sandbox (SEBI, 2022[59]).
Furthermore, ensuring the Sandbox is adequately resourced to operate, as well as proactive communication with financial market participants to explain the benefits of participation, can further enhance its effectiveness.
2.5.2. Developing the sustainable finance framework
Ukraine’s post-war reconstruction provides a unique opportunity to integrate environmental and climate change mitigation objectives as part of infrastructure projects. One way to integrate such objectives is to develop the framework for sustainable financing instruments, for example sustainability-linked bonds. As a starting point, the government could consider issuing environmental, social and governance (ESG) bonds to develop the market and set benchmarks for corporate ESG bonds. This is discussed further in Chapter 4.
Recommendation 15: Consider expanding the range of firms and products that are eligible to participate in the NBU Regulatory Sandbox, to support innovation and ensure a level playing field across financial sub-sectors.
References
[24] Adrian, T. et al. (2025), “Macroeconomic and Fiscal Consequences of Quantitative Easing”, IMF Working Papers 2025, 158 (2025), https://doi.org/10.5089/9798229018623.001.
[65] AECM (2025), Partial Credit Guarantee Fund in Agriculture – PCGF, https://aecm.eu/partial-credit-guarantee-fund-in-agriculture-pcgf/.
[29] Arping, S., G. Lóránth and A. Morrison (2010), “Public initiatives to support entrepreneurs: Credit guarantees versus co-funding”, Journal of Financial Stability, Vol. 6/1, pp. 26-35, https://doi.org/10.1016/J.JFS.2009.05.009.
[49] Asplund, T. (2022), “Instruments to prevent risk of indebtedness becoming more common in Europe”, Bank of Finland Bulletin, 2022-1, https://www.bofbulletin.fi/en/2022/1/instruments-to-prevent-risk-of-indebtedness-becoming-more-common-in-europe/.
[63] Bank of England (2014), “Money creation in the modern economy”, Quarterly Bulletin, Q1, https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy.
[31] BGK (2024), Outcomes of de minimis guarantees - Report of 2024 Study, Bank Gospodarstwa Krajowego, November 2024, https://www.en.bgk.pl/files/public/Raporty/Report_2024_Outcomes_of_de_minimis_guarantees_.pdf.
[54] Boone, L. and B. Cournède (2021), Finland’s Zero Homeless Strategy: Lessons from a Success Story – ECOSCOPE, https://oecdecoscope.blog/2021/12/13/finlands-zero-homeless-strategy-lessons-from-a-success-story/ (accessed on 16 September 2025).
[64] Business Development Fund (2025), Affordable Factoring Program, https://bdf.gov.ua/en/programs/program-of-financial-state-support-of-business-entities-under-factoring-contracts-affordable-factoring/.
[12] Carletti, E. et al. (2024), Ukraine’s reconstruction: Policy options for building an effective financial architecture | CEPR, https://cepr.org/voxeu/columns/ukraines-reconstruction-policy-options-building-effective-financial-architecture (accessed on 11 July 2025).
[34] CMS Law-Now (2025), Ukraine’s new law on factoring enhances transparency and legal certainty, https://cms-lawnow.com/en/ealerts/2025/06/ukraine-s-new-law-on-factoring-enhances-transparency-and-legal-certainty (accessed on 19 June 2025).
[60] Diia (2025), eOselya Affordable Housing Loan Program, https://eoselia.diia.gov.ua/ (accessed on 11 July 2025).
[68] dos Santos, A. (2024), “The Development of Domestic Bond Markets”, mimeo, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6044577.
[55] EBRD (2025), First Ukrainian companies take advantage of new war risk insurance facility supported by EBRD, https://www.ebrd.com/home/news-and-events/news/2025/first-ukrainian-companies-take-advantage-of-new-war-risk-insuran.html (accessed on 26 August 2025).
[26] European Commission (2023), Commission Regulation (EU) 2023/2831 of 13 December 2023 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32023R2831 (accessed on 16 July 2025).
[28] European Investment Bank (2014), Credit Guarantee Schemes for SME lending in Central, Eastern and South-Eastern Europe: A report by the Vienna Initiative Working Group on Credit Guarantee Schemes, https://www.eib.org/en/publications/viwg-credit-guarantee-schemes-report.
[37] Eurostat (2025), Gross domestic product and main components, https://ec.europa.eu/eurostat/databrowser/view/NAMA_10_GDP/default/table?lang=en.
[16] Finway (2024), The Share of Non-Performing Loans, https://finway.com.ua/en/the-share-non-performing-loans/.
[20] Gonzalez-Garcia, J. (2013), “State-Owned Banks and Fiscal Discipline”, SSRN, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2346256.
[41] IFC; SECO; (2023), Knowledge Guide on Factoring Regulation and Supervision, https://www.ifc.org/content/dam/ifc/doc/2024/knowledge-guide-on-factoring-regulation-and-supervision-ifc-2024.pdf.
[17] IMF (2025), Ukraine: Eighth Review Under the Extended Arrangement Under the Extended Fund Facility, https://doi.org/10.5089/9798229014861.002.
[15] IMF (2025), “Ukraine: Seventh Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for Modification of a Performance Criterion, Rephasing of Access, and Financing Assurances Review-Press Release”, IMF Staff Country Reports, Vol. 2025/078, p. 1, https://doi.org/10.5089/9798229007122.002.
[22] IMF (2024), “Ukraine: Fifth Review Under the Extended Arrangement”, IMF Staff Country Reports, Vol. 2024/314, p. 1, https://doi.org/10.5089/9798400290534.002.
[52] Ministry of Finance of Finland (2025), Overview of Central Government Risks and Liabilities - Autumn 2024, Ministry of Finance, Helsinki, https://urn.fi/URN:ISBN:978-952-367-858-3 (accessed on 26 August 2025).
[30] MoF (2025), In August, entrepreneurs received 498 loans worth about UAH 2 billion guaranteed by the state on a portfolio basis, https://www.mof.gov.ua/uk/news/minfin_u_serpni_pidpriiemtsi_otrimali_498_kreditiv_na_blizko_2_mlrd_grn_garantovanikh_derzhavoiu_na_portfelnii_osnovi-5338 (accessed on 11 July 2025).
[53] MuniFin (2024), Affordable social housing sector, https://www.kuntarahoitus.fi/en/who-we-finance/affordable-social-housing (accessed on 1 September 2025).
[38] National Bank of Ukraine (2025), Non-bank Financial Sector Review, https://bank.gov.ua/en/news/all/oglyad-nebankivskogo-finansovogo-sektoru-traven-2025-roku.
[18] NBU (2025), August Banking Sector Review, https://bank.gov.ua/admin_uploads/article/Banking_Sector_Review_2025-08_eng.pdf?v=14.
[7] NBU (2025), Financial Sector Statistics, https://bank.gov.ua/en/statistic/sector-financial (accessed on 10 July 2025).
[46] NBU (2025), Financial Stability Report June 2025, https://bank.gov.ua/admin_uploads/article/FSR_2025-H1_eng.pdf.
[50] NBU (2025), Macroprudential Policy Strategy of the National Bank of Ukraine, https://bank.gov.ua/en/news/all/strategiya-makroprudentsiynoyi-politiki-natsionalnogo-banku-ukrayini (accessed on 27 October 2025).
[23] NBU (2025), May Banking Sector Review, https://bank.gov.ua/admin_uploads/article/Banking_Sector_Review_2025-08_eng.pdf?v=14 (accessed on 27 October 2025).
[62] NBU (2025), Resilience Assessment of Ukraine’s Banks, National Bank of Ukraine, https://bank.gov.ua/en/supervision/about/diagnostics-of-banks.
[44] NBU (2025), Strategy for the development of mortgage lending, https://bank.gov.ua/ua/news/all/strategiya-z-rozvitku-ipotechnogo-kredituvannya (accessed on 28 July 2025).
[33] NBU (2025), Support to Factoring Regulation in Ukraine project, https://bank.gov.ua/en/events/support-regulation-factoring-Ukraine.
[10] NBU (2024), 2024 Progress Report on the Roadmap for the Strategy of Ukrainian Financial Sector Development, https://bank.gov.ua/en/news/all/zvit-z-realizatsiyi-strategiyi-rozvitku-finansovogo-sektoru-ukrayini-za-2024-rik.
[45] NBU (2024), Financial Stability Report, December 2024, https://bank.gov.ua/en/news/all/zvit-pro-finansovu-stabilnist-gruden-2024-roku (accessed on 11 July 2025).
[57] NBU (2023), NBU Launches Regulatory Sandbox to Test Innovative Products, https://bank.gov.ua/en/news/all/natsionalniy-bank-zapuskaye-regulyatornu-platformu-dlya-testuvannya-innovatsiynih-produktiv (accessed on 16 September 2025).
[2] NBU (2022), NBU-Initiated Joint Banking Network POWER BANKING Has Been Created, Will Even Work in Blackouts, https://bank.gov.ua/en/news/all/za-initsiativi-natsionalnogo-banku-stvorena-spilna-bankivska-mereja-power-banking-yaka-pratsyuvatime-navit-v-umovah-blekautu (accessed on 3 September 2025).
[58] OECD (2025), Asia Capital Markets Report 2025, OECD Capital Market Series, OECD Publishing, Paris, https://doi.org/10.1787/02172cdc-en.
[14] OECD (2025), Global Debt Report 2025: Financing Growth in a Challenging Debt Market Environment, OECD Publishing, Paris, https://doi.org/10.1787/8ee42b13-en.
[1] OECD (2025), Mapping Ukraine’s Financial Markets nad Corporate Governance Framework for a Sustainable Recovery, OECD Publishing, Paris, https://doi.org/10.1787/866c5c44-en.
[4] OECD (2025), OECD Economic Survey: Ukraine, OECD Publishing, Paris, https://doi.org/10.1787/940cee85-en.
[3] OECD (2025), OECD Integrity and Anti-Corruption Review of Ukraine, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/7dbe965b-en.
[56] OECD (2024), “Regulatory approaches to Artificial Intelligence in finance”, OECD Artificial Intelligence Papers, No. 24, OECD Publishing, Paris, https://doi.org/10.1787/f1498c02-en.
[43] OECD (2023), Brick by Brick (Volume 2), OECD Publishing, Paris, https://doi.org/10.1787/e91cb19d-en.
[6] OECD (2023), National Strategy for Financial Education for Poland, OECD Publishing, Paris, https://doi.org/10.1787/2e954031-en.
[5] OECD (2023), “OECD/INFE 2023 International Survey of Adult Financial Literacy”, OECD Business and Finance Policy Papers, No. 39, OECD Publishing, Paris, https://doi.org/10.1787/56003a32-en.
[27] OECD (2023), Recommendation of the Council on SME Financing, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0493.
[13] OECD (2022), Capital Market Review of Romania: Towards a National Strategy, OECD Publishing, Paris, https://doi.org/10.1787/9bfc0339-en.
[48] OECD (2021), Mortgage finance across OECD countries, OECD Publishing, Paris, https://doi.org/10.1787/f97d7fe0-en.
[32] OECD (2020), Alternative Financing Instruments for ASEAN SMEs, OECD Publishing, Paris, https://doi.org/10.1787/a4779afc-en.
[21] OECD (2019), A Policy Maker’s Guide to Privatisation, OECD Publishing, Paris, https://doi.org/10.1787/ea4eff68-en.
[11] OECD (2017), “OECD Equity Market Review: Asia 2017”, OECD Publishing, Paris, https://doi.org/10.1787/a938cb45-en.
[67] OECD (1998), Capital Market Development in Transition Economies, OECD Publishing, Paris, https://doi.org/10.1787/9789264163676-en.
[19] Panizza, U. (2024), “Bank Ownership Around the World”, Journal of Banking & Finance, Vol. 166, https://doi.org/10.1016/j.jbankfin.2024.107255.
[59] SEBI (2022), “Inter-operable Regulatory Sandbox: Standard Operating Procedure”, https://www.sebi.gov.in/sebi_data/commondocs/oct-2022/SoP%20for%20Interoperable%20Regulatory%20Sandbox_Final_p.pdf (accessed on 25 April 2025).
[9] Shelud’ko, N. and S. Shishkov (2020), “Institutions of Collective Investment in Ukraine: Scale and Consequences of Investment Dysfunction”, Economy and Forecasting, Vol. 2, pp. 91-104, https://doi.org/10.15407/econforecast2020.02.91.
[47] State Statistics Service of Ukraine (2025), Housing market price changes, https://stat.gov.ua/en/explorer?urn=SSSU%3ADF_PRICE_CHANGE_HOUSING_MARKET%2811.0.0%29 (accessed on 26 August 2025).
[61] Statistics Finland (2025), Gross domestic product and national income, supply and demand, annually by Transaction, Year and Information. PxWeb, https://pxdata.stat.fi/PxWeb/pxweb/en/StatFin/StatFin__vtp/statfin_vtp_pxt_11sf.px/table/tableViewLayout1/ (accessed on 16 September 2025).
[36] Turkish Association of Financial Institutions (2025), Reports of Annual Factoring Sector, https://www.fkb.org.tr/reports-and-publications/reports/reports-of-factoring-sector/.
[8] Ukrainian Association of Investment Business (2025), The Ukrainian Fund Market in Figures, https://www.uaib.com.ua/en/analituaib (accessed on 10 July 2025).
[66] Ukrgasbank (2025), “Ukrgasbank Secures €120 Million in EIB Loans and a Portfolio Guarantee to Power Ukraine’s Businesses and Municipalities”, Press Release, https://www.ukrgasbank.com/en/press_center/news/14085-.
[35] UNIDROIT (2023), Model Law on Factoring, https://www.unidroit.org/instruments/factoring/model-law-on-factoring/ (accessed on 19 June 2025).
[40] Voronova, A. (2023), An alternative to loans and a simple way to replenish working capital, https://epravda.com.ua/columns/2023/09/5/703963/ (accessed on 20 June 2025).
[39] World Bank (2025), Global FInancial Development Databank, https://databank.worldbank.org/source/global-financial-development/Series/GFDD.OI.17.
[25] World Bank (2024), “The rise of sovereign–bank nexus risks in developing economies”, https://blogs.worldbank.org/en/psd/the-rise-of-sovereign-bank-nexus-risks-in-developing-economies.
[42] World Bank et al. (2025), Ukraine - Fourth Rapid Damage and Needs Assessment, https://www.undp.org/ukraine/publications/ukraine-fourth-rapid-damage-and-needs-assessment-rdna4-february-2022-december-2024-english (accessed on 16 July 2025).
[51] Y-Säätiö (2026), Homelessness in Finland, https://ysaatio.fi/en/housing-first/homelessness-in-finland/ (accessed on 14 January 2026).
← 1. See OECD (1998[67]) for a general account and OECD (2022[13]) for an example of Romania as another eastern European transition economy.
← 2. Comparing the data with a similar survey conducted in September 2021 indicates that the usage of savings in cash, especially in foreign currencies, and in bank accounts has increased since then. Nevertheless, the overall picture of a weak usage of tradable financial instruments has been week even before the start of Russia’s full-scale invasion in 2022.
← 3. This should be combined with campaigns strengthening the trust in the banking system, see below.
← 4. See dos Santos (2024[68]) for empirical evidence that the issuance of government bonds can stimulate the issuance of corporate bonds with similar maturities.
← 5. The NBU is currently working on the 2025 Resilience Assessment of Ukraine’s Banks. As of now, the results have not been published (NBU, 2025[62]).
← 6. See also Chapter 4.
← 7. Central bank purchases of government bonds typically result in both an increase of commercial bank deposits at the central bank and non-bank deposits at commercial banks by the amount of the purchase (Bank of England, 2014[63]).
← 8. The main programmes are:
The Affordable Credits 5-7-9% programme (the “5-7-9 programme”), which provides subsidies on the interest rate of commercial loans for eligible businesses.
The Affordable Financial Leasing 5-7-9% programme (the “affordable leasing programme”), which provides subsidies for leasing agreements for eligible businesses.
The Affordable Factoring programme, which provides subsidies for factoring agreements for eligible businesses (Business Development Fund, 2025[64]).
The Portfolio Guarantee programme, whereby the government provides guarantees to banks that apply across their corporate lending portfolio, up to a predetermined amount.
The Partial Credit Guarantee Fund (AECM, 2025[65]), which aims to support agricultural SMEs.
The Energy Efficiency Credit Guarantee programme (supported by the United Nations Industrial Development Organization), aiming to assist companies seeking funding to implement energy saving measures (Ukrgasbank, 2025[66]).
← 9. Information provided by the Ministry of Finance, as well as sourced online (Diia, 2025[60]). eOselya loans are generally available for purchasing a first home, upsizing a home or for those whose property is in an occupied region. The program sets limits on the size of property and the overall price, based on average property values adjusted per geographical region.
← 10. For example, households in the informal sector or with less stable incomes such as self-employment may struggle to meet mortgage requirements, even if a subsidy improves the affordability.
← 11. Calculated based on Finland’s 2024 GDP at market prices (Statistics Finland, 2025[61]).