KIEV, Nov. 29 - The outlook for Ukraine's banking system remains negative, says Moody's Investors Service in a new Banking System Outlook published on Tuesday.

The outlook, which captures the credit conditions that the banks will face over the next 12-18 months, is negative due to (i) an operating environment characterized by a modest economic recovery after a very deep recession; (ii) weak profitability; (iii) a very high volume of non-performing loans, with a substantial overhang of FX loans; and (iv) the limited availability of local-currency funding, prompting the banks to deleverage.

The agency said that the slowdown in the global recovery will likely squeeze demand for commodities, including Ukrainian exports such as steel and other metals.