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NBU Sets the Required LCR Minimum to 80% Starting December 2018

31 October 2018

 

The National Bank of Ukraine (NBU) has approved the introduction of a required liquidity ratio, namely the liquidity coverage ratio (LCR), from 1 December 2018. According to the NBU Board Decision, the minimum LCR level is set to 80% initially and then brought to 100% in stages. The schedule developed by the NBU presents a convenient way for banks to prepare for operating under the new liquidity requirements.

 

The NBU Board Decision incorporates the outcomes of test calculations of the LCR that have been performed since 1 June 2018. Another aspect taken into account is banks’ suggestions expressed during various meetings of NBU specialists with representatives of the banking community.

 

The LCR level is set for all currencies in total and for the group of foreign currencies separately. Banks will also calculate the LCR in hryvnia, but the NBU does not set a required minimum level for it.

 

Banks will calculate the LCRs on a daily basis starting from 1 December 2018.The LCR values will be calculated as 30-day moving averages. Thus, the first accounting date for the LCRs falls on 31 December 2018.

 

Pursuant to the NBU Board Decision, the LCR minimum will be brought to 100% in the following stages:

·          80% starting from 31 December 2018

·          90% starting from 1 June 2019

·          100% starting from 1 December 2019.

 

In January 2019, the NBU will start publishing bank-specific information on compliance with the LCR, the same way it publishes the data on banks’ compliance with other ratios, under the section Statistics – Banking system indicators.

 

As a side note, the liquidity coverage ratio (LCR) sets the minimum liquidity level required to cover the estimated net cash outflow within 30 days, including under a stress scenario.

 

It is more effective than other ratios in reflecting a bank’s resilience to short-term liquidity shocks that occur in times of crises with major retail cash outflows. The compliance with the LCR means that a bank has sufficient liquidity to fully discharge its liabilities during a 30-day crisis period. The LCR is in line with universal approaches to assessing liquidity and is familiar to international investors.

 

The LCR was introduced by NBU Board Resolution No. 114 On Amendments to the Instruction on Procedure for Regulation of Bank Activities in Ukraine. Furthermore, the NBU Board Decision No. 732-D approves the amendments to the Calculation Methodology of the Liquidity Coverage Ratio (LCR). These instruments come into effect on 1 December 2018.

 

For reference: The LCR is a liquidity ratio developed by the Basel Committee on Banking Supervision in response to the global financial crisis of 200708. The ratio has been a mandatory requirement for EU banks since 2015 under CRR/CRD IV. At present, 45 countries have adopted the LCR, including non-members of the Basel Committee on Banking Supervision.

 

In September 2016, a group of experts from functional units of the NBU and banks was appointed to develop and introduce the LCR in Ukraine. In order to adopt the international practice for implementing the ratio, the NBU was consulted by the BCBS, the World Bank, and the central banks of other countries.

 

 


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Last modification   31.10.2018