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NBU increases mandatory reserve ratios for banks' current accounts on by 5 pp, to allow them to use 50% govt bonds from Jan 11
KYIV. Dec 8 (Interfax-Ukraine) – The National Bank of Ukraine (NBU) will increase the required reserve ratios for banks, in particular, from January 11, it will raise the required reserve ratios for current accounts by 5 percentage points, to 5% in hryvnias and to 15% in foreign currency and will allow the banks to use domestic government debt securities to meet up to 50% of their total required reserve ratios, according to the NBU website on Thursday.
"In view of the expected price movements, persistently high inflation expectations and the upward shift of the balance of risks, the NBU Board decided to… to raise reserve requirements for banks. This will enhance monetary transmission, support exchange rate stability, and gradually slow inflation in 2023," the NBU said.
At the same time, the NBU will allow the banks to use benchmark domestic government debt securities to meet up to 50% of their total required reserve ratios. The NBU will decide separately on a list of securities eligible for meeting the required reserve ratios, on the basis of proposals made by the Finance Ministry.
The banks must start complying with new reserve requirements from 11 January 2023, using domestic government debt securities to meet a portion of their required reserve ratios if they chose to do so.
"This mechanism will encourage the banks to expand their portfolios of domestic government bonds, lowering the risk of returning to the monetary financing of the budget deficit in 2023," the regulator said.
According to the report, after assessing the effectiveness of the above measures and changes in the banking system’s liquidity, the NBU will decide whether or not it should increase the required reserve ratios any further.
