The analysis of the dynamics of macroeconomic and monetary indicators for January – May 2012, which has been carried out by the Board of the National Bank of Ukraine, points to persistent positive trends in the performance of domestic economy. In particular, real GDP demonstrated positive dynamics in the first quarter of 2012, inflation continued to slow down and an improvement in the balance of payments was recorded.

At the same time, the unstable situation that is currently unfolding in global commodities and financial markets calls for preventative measures to minimize risks arising from this instability.

Under these conditions, it is necessary to take steps towards de-dollarization of economic relations by imposing more differentiated required reserve ratios to grant preferential provisioning terms to banks on funds attracted in the national currency.

The above-mentioned measures will help maintain stability of the monetary unit of Ukraine amid the unstable situation in global markets, exchange rate volatility and cross-border capital flows.

With a view to offsetting certain factors generating volatility in the interbank credit market and encouraging banks to assume greater responsibility for managing their own liquidity and given the recent reduction in the amount of required reserves held by banks on a separate account with the National Bank of Ukraine, it is deemed expedient to increase the amount of required reserves banks are required to hold on a correspondent account with the National Bank of Ukraine  at the beginning of a business day and optimize the procedure and terms for the submission of applications for liquidity support by banks through the overnight credit facility.

In order to ensure external soundness and solvency in the context of persistent instability and uncertainties in global markets, which limits access to external financial resources, it is necessary to use domestic funding sources more actively. The Government of Ukraine under the auspices of the National Bank of Ukraine has issued foreign currency-denominated T-bills, which are in demand with investors. In order to give an additional incentive for investors, the National Bank of Ukraine considers the possibility of allowing banks to include the portion of the face value of these financial instruments in the required reserve coverage. 

In view of the above, and in order to streamline the NBU regulations on forming the required reserves and pursuant to items 1.8 and 1.10 of Chapter 1 of Regulation on the Procedure for Forming the Required Reserves by Ukrainian Banks and Foreign Banks’ Branches Operating in Ukraine approved by Resolution of the Board of the National Bank of Ukraine No 91 of 16 March 2006, registered with the Ministry of Justice of Ukraine on 23 March 2006 under No 312/12186, and Regulation on NBU Regulation of Bank Liquidity approved by Resolution of the Board of the National Bank of Ukraine No 259 of 30 April 2009, registered with the Ministry of Justice of Ukraine on 6 May 2009 under No 410/16426, the Board of the National Bank of Ukraine approved Resolution “On Certain Issues related to the Money Market Regulation” No 248 of 19 June 2012, which stipulates the following:

1. The following procedure for forming the required reserves by Ukrainian banks shall be established:
50 % of the required reserves formed during the preceding provisioning period shall be held on a separate account with the National Bank of Ukraine No 3203 “Funds of required reserves transferred by banks”;

the remaining amount of the required reserves formed pursuant to the ratios established for the corresponding period shall be formed on a correspondent account with the National Bank of Ukraine.

2. The calendar month during which banks set aside required reserves shall be established as the reporting period of provisioning.

3. The following required reserve ratios for forming required reserves by banks shall be established:
national currency time funds and deposits of legal entities and households – 0;
short-term foreign currency funds and deposits of legal entities and households – 9;
long-term foreign currency funds and deposits of legal entities and households – 3;
demand deposits of legal entities and households in the national currency and funds held in current accounts  – 0;
demand deposits of legal entities and households in the foreign currency and funds held in current accounts – 10;
funds attracted by banks from non-resident banks and non-resident financial institutions in the national currency – 0;
funds attracted by banks from non-resident banks and non-resident financial institutions in the foreign currency (except for Russian rubles), – 3;
funds attracted by banks from non-resident banks and non-resident financial institutions in Russian rubles – 0.

4. The amount of required reserves to be held daily on the bank correspondent account with the National Bank of Ukraine at the beginning of a business day shall make up not less than 50 % of the amount of required reserves formed by banks for the previous provisioning period under report.

5. The banks shall be allowed to include in the coverage of required reserves held by banks on a separate account with the National Bank of Ukraine No 3203 “Funds of required reserves transferred by banks” the following financial instruments purchased by banks:

target T-bills issued with the aim to attract funds for financing the actions related to the preparation and holding of the European Football Championship 2012 in Ukraine in the amount of 50% of their face value.

foreign currency-denominated T-bills in the amount of 10% of their face value in hryvnia equivalent calculated based on the official exchange rate of hryvnia against foreign currencies set by the National Bank of Ukraine on the first day of the month following the end of the provisioning period under report.

6. A bank may apply to the National Bank of Ukraine for:
an overnight credit extended against a collateral of government T-bills or NBU certificates of deposit no more than twice a week in the amount of no more than 70% of the amount of required reserves set and formed by the bank pursuant to the established required reserve ratio on its correspondent account with the National Bank of Ukraine in the previous provisioning period under report.

an unsecured (blank) credit once a week in the amount of no more than 25 % of the amount of required reserves set and formed by the bank pursuant to the established required reserve ratio on its correspondent account with the National Bank of Ukraine in the previous provisioning period under report.

7. The following documents shall be deemed as invalid:
Resolution of the Board of the National Bank of Ukraine No 415 of 06 December 2008 "On Certain Issues related to the Money Market Regulation";
Resolution of the Board of the National Bank of Ukraine No 327 of 03 June 2009 "On Application of Banks to the National Bank of Ukraine for Refinancing Instruments";
Resolution of the Board of the National Bank of Ukraine No 195 of 15 June 2011  "On Certain Issues related to the Money Market Regulation";
Resolution of the Board of the National Bank of Ukraine No 407 of 15 November 2011 "On Certain Issues related to the Money Market Regulation";
subitem 2.2 of item 2 of Resolution of the Board of the National Bank of Ukraine No 102 of 21 March 2012 "On the Money Market Regulation";
Resolution of the Board of the National Bank of Ukraine No 197 of 18 May2012 " On Certain Issues related to the Money Market Regulation".

8. The Resolution will come into force from 30 June 2012.