Given the heightened exchange rate volatility of hryvnia and certain tensions in the foreign exchange market, the National Bank of Ukraine has taken a set of measures in recent weeks in order to maintain foreign exchange market equilibrium. In particular, the National Bank of Ukraine stepped up the size of its transactions in the foreign exchange market and used available mechanisms and tools for foreign exchange stabilization.
These steps have had a clearly positive effect. However, they had a limited effect due to the unfavorable effect of a variety of internal and external factors, including the sharp devaluation of the domestic currencies of the group of emerging market countries.
Given the above, as well as the need to exercise National Bank of Ukraine's main statutory function of maintaining the monetary unit stability, the National Bank of Ukraine Board adopted Resolution No. 49 dated February 6, 2014 “On the Measures relating to Banks' Activities and the Conduct of Foreign Exchange Transactions” (hereinafter – Resolution No. 49), which is meant to be a temporary preventive measure designed to protect the interests of depositors and other creditors of banks. It will promote the banking system stability, ensure timely settlement of banks' transactions, including under foreign economic contracts and related to them economic activity.
Resolution No. 49 envisages the following: expansion of the range of possibilities of providing liquidity support to banks offered by the National Bank of Ukraine; setting the required reserve ratio for short term external loans at zero; imposition of certain restrictions on the execution of orders given by clients within the limits of the balance on their current account at the start of the business day; imposition of temporary restrictions on certain types of foreign exchange purchase transactions conducted in the interbank foreign exchange market; stricter time constraints for foreign exchange transactions conducted by authorized banks upon instruction of legal entities or sole proprietors, etc.
At the same time, Resolution No. 49 envisages greater control over timeliness of payment of salaries, pensions, scholarships, other social benefits. The restrictions do not apply to payments for education and medical treatment abroad, transfers for people moving their country of residence or salary payments to non-residents in Ukraine, etc.
In addition, Resolution No. 49 enhances the possibility of predicting when pressure can reach its peak in the foreign exchange market, helps improve financial monitoring and places no restrictions on the use of income and savings by citizens.
Resolution No. 49 comes into effect from on February 7, 2014, and will remain in force until the National Bank of Ukraine adopts a special resolution.