On March 10, 2015, the NBU held a weekly meeting with the top managers of Ukrainian banks. NBU Governor Valeria Gontareva said she was sure Ukraine’s foreign exchange market would stabilize further after Ukraine received another tranche under the IMF’s EFF. The tranche is expected to be approved by the IMF Executive Board tomorrow, on March 11.

The participants in the meeting discussed the first effects of the administrative restrictions that were imposed last week. On the whole, the bankers believed the measures were an important, effective and appropriate NBU response. They also said that the new measures did not create any particular difficulties for their customers, and that the latter could receive expert advice if they required it. The National Bank of Ukraine will clarify any issues that banks may have regarding the new measures.

Speaking about general market trends, the bankers said that the deposit outflow was continuing, although at a slower pace than before. The bankers believe this to be due to the conflict in eastern Ukraine being gradually resolved. They agreed that a ceasefire observed by all parties to the conflict and a peaceful settlement would be the best encouragement for people to return deposits to the banking system.

At the end of the meeting, Gontareva once again called on the bankers to join the NBU initiative to resolve the issue with the foreign currency loans granted to households, and to sign a memorandum on restructuring foreign currency consumer loans (the “Memorandum”). Banks earlier suggested drafting a memorandum to this effect. 12 leading banks agreed to cover some of the losses arising from the hryvnia depreciation that took place last year. The memorandum requires amendments to Ukraine’s Tax Code, enabling banks to smoothly, in particular without creating additional tax obligations, ease the terms and conditions of loan agreements for borrowers, forgive debts in full or in part, and to cover losses incurred from bad loans, using funds from contingency reserves. The Memorandum also requires declaring null and void the Law of Ukraine On Moratorium on the Recovery of Property of Ukrainian Citizens Provided as Collateral for Foreign Exchange Loans. This moratorium interferes with business activity by creating real threats to banks’ solvency and making it impossible for them to fulfill their obligations to depositors. All this shows that the problem requires a multifaceted solution.