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Banks after raising reserve requirements in March not to be able to earn anything on balances – deputy NBU governor
KYIV. Jan 27 (Interfax-Ukraine) – Banks, guided by short-term commercial goals, were in no hurry to raise deposit rates after the increase of the key policy rate by the National Bank and despite its numerous verbal interventions, which as a result created a significant and monthly growing "shed" in the form of balances of the population’s funds on current accounts, Deputy Governor of the National Bank of Ukraine (NBU) Kateryna Rozhkova has said.
"During the discussion of the numbers of the new macro-economic forecast, one more piece of news somehow passed almost imperceptibly: an increase in the reserve ratio for current funds of the population by another 10%, starting from March 2023, and the inability to cover these extra reserves at the expense of government bonds. What does this mean for banks? They will not be able to earn anything on these balances," she said, commenting on this decision on Facebook.
According to Rozhkova, it is a fair and necessary decision, since the two main factors in the growth of funds in the accounts are social and other government payments and restrictions on cash withdrawals, which were introduced by the NBU on February 24 last year.
"With the gradual lifting of restrictions, these funds will instantly appear on the cash market. And, on the one hand, they will put pressure on the cash rate. On the other hand, they will worsen the liquidity of banks. Therefore, there is an expectation that potential income losses will force banks to increase the attractiveness of term deposits," the deputy governor of the National Bank said.
She recalled that since January 11, the NBU has already raised reserve requirements by 5 percentage points (pp) on funds on demand accounts and current accounts, and from February 11 – by another 5 pp, but with the possibility of up to 50% to form them at the expense of benchmark government bonds.
"We must also pay tribute to the Ministry of Finance, which is gradually increasing the yield on hryvnia government bonds. All this has already revived the domestic market compared to last year. Even the subsidiaries of international banking groups for the first time since the beginning of the full-scale invasion have become more active in this market, despite their earlier declaration of the absence of limits on investments in government bonds," Rozhkova said.
