The National Bank of Ukraine continues to take systemic measures to exercise its main function - maintaining the stability of the national currency of Ukraine. Pursuant to the laws of Ukraine one of the means and methods of monetary policy is adjustment of reserve requirements for banks

Having analyzed the economic and monetary situation, the National Bank of Ukraine Board has adopted Resolution No. 371 of September 19, 2013, On Some Issues of Monetary Market Regulation (hereinafter - Resolution No. 371) which shall enter into force on September 30, 2013.

Resolution No. 371, in particular, provides for increase of reserve ratio requirement from 5% to 7% for foreign currency long-term funds and deposits of legal entities and individuals. Reserve ratio requirement for other attracted funds remain unchanged.

Resolution No. 371 also provides for optimization of assets that can be used by banks to cover the reserve requirements. Thus, from September 30, 2013, to cover the reserve requirements banks can use the following:

domestic sovereign bonds in foreign currency purchased in the amount of 10% of their book value in hryvnia equivalent (earlier accepted in the amount of 10% of their face value);

long-term domestic sovereign bonds in the national currency with term to maturity (according to the primary issue conditions) of over 3 600 days in the amount of 100% of their book value (earlier not accepted as coverage for reserve requirements);

balance on bank’s accounts 1500 “Correspondent accounts opened in other banks” and 1502 “Banks funds in settlements” opened in PJSC “Settlement Center for Servicing Financial Market Agreements” in the amount of 100%

At the same time, noninterest-bearing domestic sovereign bonds of Ukraine issued to attract funds to finance Euro-2012 events to prepare and conduct the football championship are excluded from the list of such assets due to their full redemption.

Furthermore, Resolution No. 371 adjusts the procedure of acceptance of the abovementioned assets to cover the reserve requirements, particularly that part of them which banks are required to build and hold in the correspondent account with the National Bank of Ukraine. The procedure which was in effect before Resolution No. 371 provided for banks to include certain assets as a part of the reserve requirements kept on a separate account with the National Bank of Ukraine.

Mr. Oleksandr Arseniuk, Deputy Director of General Department for Monetary Policy, commented on the Resolution No. 371 and said that it will have a multifold impact on the monetary market conditions.

First of all, respective measures will allow to quickly balance the banking system liquidity during certain seasonal fluctuations of money demand and supply. “This measure, among other things, has preventive significance in the conditions of increased tension on the world markets that create some pressure on national currencies of certain emerging market economies”, - noted Mr. Oleksandr Arseniuk.

Second, increase of the reserve ratio requirement for foreign currency long-term funds and deposits of legal entities and individuals should be considered as one of the regular measures in the systemic actions of the National Bank of Ukraine with the aim to de-dollarize economy of the country. According to Mr. Oleksandr Arseniuk, as of September 19, 2013, the data shows the increase by 20.5% of the total amount of deposits in the national currency of legal entities and individuals since the beginning of the year and decrease by 0.3% of deposits in foreign currency. “Even during September, despite certain fluctuations in the markets, deposits in hryvnia have been increasing by considerably higher rates - by 0.9% and by 0.2% higher than deposits in foreign currency, which is another proof of the high level of population’s confidence in the national currency”, - he emphasized adding that the dollarization level (ratio of deposits in foreign currency to the money supply) fell by 3.4 p.p. to 28.7% since the beginning of the year.

Third, provisions of Resolution No. 371 are aimed at facilitation of stock market development as one of the necessary elements of efficient money market regulation. “Possibility to use funds on banks accounts with PJSC “Settlement Center for Servicing Financial Market Agreements” to cover reserve requirements will stimulate banks to direct more funds to transactions on stock market and as a result will facilitate the increase of financial instruments liquidity”, - said Oleksandr Arseniuk.