On 29 December 2015, Governor of the National Bank of Ukraine Valeria Gontareva held a press conference on the results of the regulator’s performance in 2015.

Speaking at the press conference, Ms Gontareva highlighted the major achievements made by the NBU in 2015 and unveiled its plans for 2016.

The major achievement over the past twelve months has been securing the financial stability in Ukraine. “The main phase of the banking sector clean-up is completed and we are now moving to the next phase, which is to restart the banking system. The balance of payments is in equilibrium and the situation on the foreign exchange market is stabilized. As a result, we observe a downward trend in inflation.  We have put an end to the fiscal dominance over monetary policy and increased the international reserves by 77% to USD 13.3 billion,” said the NBU Governor.        

One of the NBU’s key decisions in 2015 was to maintain a flexible exchange rate regime and irreversibly abandon a fixed exchange rate regime.   According to Ms Gontareva, the transition to a flexible exchange rate was painful as it coincided with the escalation of the conflict in Eastern Ukraine and was accompanied by a steep depreciation of the hryvnia that occurred at the beginning of the year. Today, we can say that we have managed to stabilize the foreign exchange market. Furthermore, the supply of foreign currency on the interbank market has long exceeded the demand for it.  This has enabled the NBU to purchase USD 1.6 billion since the beginning of the year. At the same time, banks were purchasing foreign currency on the cash FX market. Banks’ net purchases of foreign currency from households amounted to USD 1.5 billion.

Another achievement this year has been the clean-up of the banking system.  “The face of the banking industry has changed drastically. Large banks accounting for 90% of the market have been cleaned up. Since the beginning of 2015, the NBU has put 33 banks into resolution. Overall, since the beginning of 2014, 63 banks, accounting for about a third of the banking system, have been put into resolution,” Ms Gontareva noted.

Diagnostic studies of the 20 largest banks have been conducted this year to identify banks' capital needs.    Following consultations with banks, it was decided to extend the timeframe for the approval of recapitalization plans for the top 10 banks by one month – from 1 January until 1 February 2016, and for the next 10 banks from 1 February until 1 April 2016. 

Significant progress has been made on the disclosure of banks' beneficial owners – the level of transparency of the banking system now stands at over 98%.

The NBU has streamlined the real estate appraisal methodology that is used to assess the value of collateral pledged against refinancing loans. Some of the best international companies are engaged to perform appraisal services. Ms Gontareva pointed out that banks’ total debts under refinancing loans currently stand at UAH 100.5 billion. “I would like to stress that banks’ debts under stabilization and refinancing loans have declined by UAH 8.4 billion since I assumed office.”

The NBU Governor noted a gradual stabilization in the financial sector and the restoration of confidence in the banking system, as evidenced by a UAH 11.4 billion increase in household deposits placed with solvent banks.

There is excess liquidity in the banking system: UAH 76 billion has been invested by banks in NBU certificates of deposit; deposits in banks’ correspondent accounts amount to UAH 33 billion; the banking system's total liquidity exceeds UAH 109 billion.

The NBU Governor pointed out that the regulator is engaged in steadfast efforts to develop cashless payments and reduce cash circulation in the economy, which would bring our country closer to the living standards of developed countries, reduce the size of shadow economy, and contribute to the stability of the banking system.

As of 1 December 2015, the value of banknotes and coins in circulation stood at UAH 294.1 billion, having decreased by UAH 11 billion from January to November.

Additionally, the NBU’s efforts to upgrade the NSMEP based on open international standards contributed to the development of the national payment system and, thus, to an increase in the use of cashless payments. In 2015, the network of ATMs and POS terminals accepting NSMEP cards expanded, accounting for 80% of the payment cards market.

In the year that is coming to a close, significant progress has been made in implementing the NBU transformation project and reforming the financial sector as a whole.  The transformation project is estimated to deliver UAH 7.3 billion in savings on capital and operational expenditures between 2014 and 2016.

The NBU Governor paid special attention to the NBU’s plans for the upcoming year.  According to Ms Gontareva, the regulator plans to complete the transition to an inflation-targeting regime by the end of 2016. Thanks to this move, inflation will no longer be a source of concern for businesses and the public, confidence in the hryvnia will be restored, and the value of real incomes of households and businesses will not be eroded by rising prices.

Commenting on the UAH/USD exchange rate forecast, Ms Gontareva said that the exchange rate of UAH 24.1 per USD 1 set forth in the state budget is realistic.  However, she pointed to risks that might prevent the forecast from materializing: “These risks include falling global prices for key Ukrainian export commodities (steel and grain) and a cycle of interest rate rises launched by the US Federal Reserve that could trigger repercussions across the international capital market and create unfavorable external conditions arising from depreciation of currencies from Ukraine’s trade partner countries”.

Wrapping up the press conference, Ms Gontareva thanked the NBU staff and Board members for their concerted and consistent efforts on all fronts.