tight monetary policy as well as the benign global price environment for ukrainian exports in the first half of the year, and the record harvest of grain crops in the second half of 2018, the hryvnia strengthened by 1. 4 % over the year. this is the sign of stabilization in the foreign exchange market of ukraine. at the same time, ukrainians now trust the nbu ’ s ability to smooth out excessive market fluctuations. this is proven by the fact that even russian aggression in the kerch strait and the imposition of the 1 / 3 bis central bankers'speeches martial law have not caused any major panic on the foreign exchange market. we highlighted developments on the foreing exchange market and continued to be active in the market, thus preventing panic among market participants and households. the stronger hryvnia allowed the nbu to increase international reserves throughout the year by purchasing foreign currency on the interbank market. external financing became another source : ukraine received a new program of cooperation with the imf, which lays the groundwork for further strengthening of macrofinancial stability. as a result, usd 2. 4 billion was added to the reserves by international partners ( the imf, the eu and the world bank ). the resulting amount of international reserves is the highest in five years, at usd 20. 8 billion. the last time we saw such figures was in the fall of 2013. the financial sector is showing good performance as well. the banking system is not only resilient, capitalized, and transparent, but also profitable – for the first time in five years. consumer confidence in the banking system is on the rise. hryvnia household deposits increased 15 % last year. banks are finally doing more lending, with hryvnia household loans up 31 % last year. in addition, we can currently talk about a certain recovery in corporate lending. our priorities in achieving these results were identified by the nbu ’ s medium - term strategy. approved and unveiled in the spring of 2018, the strategy identifies seven key goals of the nbu : 1. low and stable inflation. 2. stable, transparent, and effective banking system. 3. resumption of lending. 4. effective regulation of the financial sector. 5. free flow of capital. 6. financial inclusion. 7. modern, open, independent, and effective central bank. the nbu ’ s activities aimed at achieving these goals were what made possible the comforting highs and record - high figures of

the banking panics of an earlier era. although the vulnerabilities associated with short - term wholesale funding and excessive leverage can be seen as structural weaknesses of the global financial system, they can also be viewed as a consequence of poor risk management by financial institutions and investors, which i would count as another major vulnerability of the system before the crisis. unfortunately, the crisis revealed a number of significant defects in private - sector risk management and risk controls, importantly including insufficient capacity by many large firms to track firmwide risk exposures, such as off - balance - sheet exposures. this lack of capacity by major financial institutions to track firmwide risk exposures led in turn to inadequate risk diversification, so that losses – rather than being dispersed broadly – proved in some cases to be heavily concentrated among relatively few, highly leveraged companies. here, i think, is the principal explanation of why the busts in dot - com stock prices and in the housing and mortgage markets had such markedly different effects. in the case of dot - com stocks, losses were spread relatively widely across many types of investors. in contrast, following the housing and mortgage bust, losses were felt disproportionately at key nodes of the financial system, notably highly leveraged banks, broker - dealers, and securitization vehicles. some of these entities were forced to engage in rapid asset sales at fire - sale prices, which undermined confidence in counterparties exposed to these assets, led to sharp withdrawals of funding, and disrupted financial intermediation, with severe consequences for the economy. private - sector risk management also failed to keep up with financial innovation in many cases. an important example is the extension of the traditional originate - to - distribute business model to encompass increasingly complex securitized credit products, with wholesale market funding playing a key role. in general, the originate - to - distribute model breaks down the process of credit extension into components or stages – from origination to financing and to the postfinancing monitoring of the borrower ’ s ability to repay – in a manner reminiscent of how manufacturers distribute the stages of production across firms and locations. this general approach has been used in various forms for many years and can produce significant benefits, including lower credit costs and increased access of consumers and small and medium - sized businesses to capital markets. however, the expanded use of this model to finance subprime mortgages through securitization was mismanaged at several points, including the initial under