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28
March
2023

NBU expects total bank reserves to grow by UAH 17 bln after raising reserve requirements in May

KYIV. March 28 (Interfax-Ukraine) – The National Bank of Ukraine (NBU) expects banks to increase their total reserves by UAH 17 billion after equalizing, from May 11, the reserve requirements by banks on deposits of individuals for a period of up to three months with the reserve requirements for funds of individuals on current accounts, the regulator’s press service said on Monday.

According to the statement, the reserve requirement for fixed-term funds and deposits of individuals with an initial maturity of up to 92 calendar days (inclusive) for funds in the national currency from May 11 will be 20%, and 30% for funds in foreign currency.

However, the reserve requirement for household deposits with a maturity of 93 calendar days will not change and will be 0% for funds in the national currency, and 10% in foreign currency.

It is indicated that, by analogy with the requirements for funds of individuals on current accounts, the mechanism for covering the benchmark government bonds will not apply to that part of the reserve requirements on deposits of individuals for up to three months, which corresponds to 10% of the reserve base.

The NBU said the corresponding step is aimed at maintaining the effectiveness of the reserve requirements mechanism and strengthening market incentives for banks to attract time deposits of the population in UAH, which, in particular, will contribute to a further increase in interest rates on time deposits, and, accordingly, to strengthen the protection of UAH savings of citizens from inflationary depreciation.

The regulator’s press service said that in January to March 2023, the NBU increased the reserve requirements for funds on demand and funds on current accounts of individuals by 20 percentage points (p.p.), and legal entities by 10 p.p. In addition, the regulator allowed banks to cover part of the reserve requirements at the expense of benchmark government bonds.