With the aim of implementing recommendations provided by the NBU Monetary Policy Committee, the Board of the National Bank of Ukraine adopted a series of decisions to extend the range of liquidity management instruments available to banks and encourage banks to perform these operations.
In particular, a new short-term liquidity management instrument was offered to the market viz holding of weekly auctions on placement of certificates of deposit with a maturity of 1 and 3 months, with the interest rate thereon being set through limited-amount interest-rate tenders. “By offering a new short-term liquidity management instrument to the market, the regulator not only contributes to shaping a yield curve, but also enables the market to determine the cost of funds, in particular, the yield on three-month maturity instruments,” said Director of the NBU Open Market Operations Department Mykola Selekhman.
The Board of the National Bank of Ukraine also adopted a decision to sell govenment bonds held in the NBU’s own portfolio. The yield on government bonds will be set depending on their maturity. They are available to the market with the following yield-to-maturity profile: 22% – on 6-month maturity government bonds, 20% – on 1- year maturity bonds, 17% – on 3-year maturity government bonds, 15% – on 5-year maturity government bonds and 12% – on 10- year maturity bonds.
The aim of these changes is to strengthen the role of market-based factors in influencing the functioning of the money market through the deployment of efficient price-setting mechanisms and by enabling to shape a yield-to-maturity curve, reviving the secondary market of government bonds, and providing banks with additional instruments designed to diversify their asset-side operations.
“The National Bank of Ukraine has offered a yield curve which looks attractive to banks”, – said Governor of the National Bank of Ukraine Valeria Gontareva, – and urged bankers to switch from “short-term” liquidity amounting to UAH 45 billion to “long-term” liquidity.
With a view to encouraging banks to purchase certificates of deposit, the Board of the National Bank of Ukraine adopted Resolution No 432, dated July 3, 2015 On Amendments to the Regulation On Regulating by the NBU of Liquidity of Banks of Ukraine, whereby it modified an approach to determining the interest accrual period during which the interest is accrued on certificates of deposit issued by the National Bank of Ukraine and establishing it as the actual period for which funds are raised. Pursuant to NBU Board Resolution No 432, the interest accrual period for certificates of deposit issued by the NBU shall begin on the day of receipt of funds from the bank and end on the day prior to the maturity date of a certificate of deposit. The respective regulatory changes come into force on July 15, 2015.
The interest on certificates of deposits issued by the National Bank of Ukraine before this resolution comes into effect shall be accrued in accordance with the terms and conditions under which they were issued and NBU regulations effective on the day of their issuance.