On 30 May 2016, Governor of the National Bank of Ukraine, Ms Valeria Gontareva, held a meeting with top managers of Ukraine’s 40 largest banks. NBU representatives at the meeting also included NBU Deputy Governors Mr Vladyslav Rashkovan, Ms Kateryna Rozhkova, and Mr Dmytro Sologub.
Ms Gontareva told the bankers that an IMF mission team led by Mr Ron van Rooden, mission chief for Ukraine, visited Kyiv during May 10–18. “We have met all the conditions of the IMF’s Extended Fund Facility Program and fulfilled commitments that fall within the scope of the NBU’s responsibility. We are currently looking forward to the successful completion of the second review under the EFF as early as possible,” said the NBU Governor.
The key topic discussed at the meeting was the NBU Board’s decision to cut the key policy rate from 19% to 18%. “We see a firm disinflation trend consistent with the NBU’s inflation targets. In April, headline inflation moderated to 9.8% y-o-y. At the same time, in monthly terms inflation was higher than in the previous months, standing at 3.5%. The increase in monthly inflation reflected the elimination of preferential natural gas tariffs for households. Despite this move, headline inflation posted a 5.1% year-to-date increase. Should price stability risks continue decline and should inflation slow, the NBU is prepared to move ahead with the monetary easing to support the economic recovery,” said Ms Gontareva.
The NBU Governor pointed out that in recent months the supply of foreign currency has exceeded the demand for it in the FX market, enabling the NBU to step up FX purchases in the interbank market. “Since mid-March, the central bank’s net FX purchases have reached over USD 1 billion, which have been used to replenish international reserved,” said the NBU Governor. “Another USD 1.1 billion was purchased by banks from the population”.
A stable foreign exchange market enabled the NBU to remove restrictions on repatriation of dividends earned in 2014-2015. “We have already received preliminary information from banks on the total amount of dividends due to foreign investors. Once this information is revised, the NBU intends to set a schedule for dividend payments. Dividends will be disbursed to foreign investors after the International Monetary Fund gives the green light for the IMF-Ukraine cooperation program,” said Ms Gontareva, adding that the NBU is prepared to move ahead with the liberalization of FX regulation.
The meeting also discussed issues related to banking supervision. NBU Deputy Governor Ms Kateryna Rozhkova pointed out that the Financial Stability Committee has approved a new regulation on credit risks faced by banks, which shall enter into effect from 1 January 2017.
The new reporting requirements as to credit risk management for banks, imposed initially as a pilot project, shall come into effect in August 2016. Ms Rozhkova underlined that the new requirements will be tougher than those already in place. In particular, the NBU will tighten the requirements for collateral and borrowers’ financial standing. “The new requirements for credit risks primarily aim to close loopholes used by banks to lower provisioning,” said Ms Rozhkova adding that the new regulation on credit risks faced by banks is fully in line with international best practices in the area of banking supervision.
Another issue discussed at the meeting was the sale of collateral and property rights of failed banks. Director of the NBU Risk Management Department Mr Ihor Budnyk said that in the first four months of 2016 a total of UAH 2.3 billion has been recovered by the regulator as proceeds from the sale of collateral pledged by insolvent banks against refinancing loans. “Hopefully, UAH 4.5 – 5 billion will be recovered by the NBU in the first half of 2016. Given that the NBU expects to recover a total of UAH 12.8 billion in 2016, we can definitely say that we are on the right track to achieve this goal,” he said.
Mr Budnyk also spoke about cooperation between the NBU and the Deposit Guarantee Fund (the DGF). As part of this cooperation, the NBU and the DGF are engaged in joint efforts to sell the assets of failed banks, which are held as collateral by the NBU. “Debt Exchange and First Financial Network, US-based loan sale advisors, will soon start operating in Ukraine. One loan sale advisor has already been registered, whereas the other will be registered within a week. They have extensive expertise in advising companies in the U.S., Latin America and Asia on how to move forward the loan sale process. We hope that these loan sale advisors will help enhance the transparency and efficiency of Ukrainian electronic platforms in selling the assets of failed banks,” said Mr Budnyk.
The NBU Governor urged the bankers to provide their feedback on tenders to sell the assets of failed banks held by the regulator as collateral. “We want to make these tenders more transparent as we seek to sell these assets at the highest price possible. We will be grateful to the bankers for their feedback in this regard,” said Ms Gontareva.