Ukraine’s banks still vulnerable, but new crisis now less likely

Ukraine’s banks have substantially decreased their external vulnerabilities over the past few years, meaning that they are now better placed to withstand a modest hryvnia devaluation and/or a slowdown in capital inflows. That said, the banking system is still fragile. A more severe adjustment in the currency than we expect would pose more serious problems. And in any case, credit conditions are likely to remain tight for some time, acting as yet another constraint on growth.