Reconstruction as financial architecture: Ukraine’s capital market moment

As Ukraine enters another year of war, discussion of reconstruction often centres on fiscal cost and external support. Aid volumes, debt sustainability and donor coordination dominate the debate. Yet the long-term success of reconstruction will depend less on headline funding totals than on how Ukraine reshapes its financial architecture.

Rebuilding physical infrastructure is essential. Rebuilding the economic system that finances and sustains that infrastructure is equally important.

Ukraine possesses a substantial base of public commercial assets and large state-linked enterprises spanning energy, transport, natural resources and industry. The question is not simply whether these entities should be privatised or retained. It is how they are structured, financed and integrated into European markets so that reconstruction strengthens, rather than strains, the sovereign balance sheet.

Privatisation, where appropriate, can play an important role. But ownership change alone does not create resilience. Governance, capital structure and market integration are more consequential than transaction mechanics.

From bank loans to bond issuance

A central structural issue is the relationship between large corporates and the banking system. State-owned banks and state-linked lenders have historically carried significant exposure to large enterprises. In a post-war reconstruction phase, this concentration presents both a risk and an opportunity.

Gradually shifting viable large corporates from reliance on bank loans towards bond issuance would alter the financial landscape. Issuance of rated corporate bonds – whether in domestic markets or, over time, in European financial centres – introduces market discipline through disclosure and credit assessment. It also diversifies funding sources and reduces implicit sovereign contingent liabilities embedded in bank balance sheets.

For the banking sector, this shift would release capacity. Capital and liquidity currently tied to large, quasi-sovereign borrowers could be redirected towards small and medium-sized enterprises. SME growth will be central to reconstruction: housing, logistics, services, light manufacturing and technology will depend on accessible credit. A banking system less concentrated on large state-linked exposures and more orientated towards entrepreneurial lending would support broader economic dynamism.

Such a transition would deepen domestic capital markets. A pipeline of credible corporate issuers creates benchmarks, yield curves and investor familiarity. Over time, this can lower the cost of capital across the economy. Capital markets are not a substitute for banks; they are a complement. In Ukraine’s case, they can also serve as a mechanism for rebalancing the financial system.

Portfolio-based development

Real estate presents a parallel opportunity. Public land and property holdings are extensive and will play a decisive role in urban reconstruction. Rather than treating these…