The Board of the National Bank of Ukraine composed of Acting Governor of the NBU Yakiv Smolii, NBU Deputy Governors Roman Borysenko, Kateryna Rozhkova, Dmytro Sologub, and Oleg Churiy held the regular meeting (last in 2017) with managers of the largest banks to review achievements of 2017 and to outline prospects for the upcoming year 2018.
In his opening statement Acting Governor of the NBU Yakiv Smolii congratulated all attendees on positive results produced in 2017. “I am delighted to note that in 2017 the banking system is once again in the black and we are witnessing growing confidence of the general public and the business community in the banking system and hryvnia,” he said. According to NBU, net profit after taxes of solvent banks over 10 months in 2017 accounted for UAH 2.15 billion, and increase in UAH retail deposits over 11 months in 2017 made up UAH 25 billion (up by 13% to UAH 215.8 billion) and corporate deposits – UAH 8 billion respectively (up by 3.7% to UAH 225.4 billion).
Yakiv Smolii delineated key trends on the money market. “Overall, 2017 was a favorable year for the Ukrainian economy i.e. inflation has gradually declined, we’ve built up gold and foreign-exchange reserves, lifted administrative restrictions on the foreign exchange market. By now, we have liberalized foreign exchange market by cancelling practically all restrictions existing in the years 2014-2015. A new foreign exchange regulation is pending,” noted Yakiv Smolii. The purpose of the new law On Foreign Currency is to make FX regulation in Ukraine transparent, simple and clear for households, businesses and banks, and will enable the NBU to provide a more prompt and effective response to fluctuations in the balance of payments and market conditions.
In his speech at the meeting Yakiv Smolii drew the attention of attendees to decision making on the key policy rate and highlighted that after a longstanding cycle of a monetary policy easing the NBU was compelled to raise the key policy rate to 14.5%. “The decisions in October and December were based on a string of factors and was completely justified. If the regulator continues to anticipate risks for inflation targets the key policyrate is likely to be further increased,” commented Yakiv Smolii on the recent NBU decisions. At the same time, the NBU regards the decisions to raise the rate in October and December not to effect the long-term downward trend of interest rates.
As for the foreign exchange market, Yakiv Smolii argued that NBU remains committed to the floating exchange rate regime and continues to implement the FX interventions’ strategy. “Since the beginning of the year, market conditions for the national currency were generally favorable and we were able to buy just under USD 1.5 billion in the FX market. The funds were used to replenish gold and foreign-exchange reserves by almost USD 19 billion,” said Yakiv Smolii and added that the NBU has enough funds and instruments to level out excessive fluctuations on the FX market.
At the meeting Yakiv Smolii also focused on the need for legal framework to continue the reform of the financial market, as well as over 30 draft laws adopted by the Verhovna Rada on lending resumption, protection of creditors’ rights, restructuring FX retail loans, preventing and combating money laundering, enhancing expediency of bankruptcy proceedings, improving corporate governance of joint-stock companies, fostering consumer rights protection with regard to financial services, and developing a credit register and others.
In the future the NBU will maintain its presence on the regional level in Kyiv and Lviv and will deliver cash to commercial banks from two cash centers located in the mentioned cities. “As to Kyiv, we will relocate commercial bank servicing to our Central Vault, since Podil became a pedestrian zone,” commented Yakiv Smolii on changes in banks’ servicing.
Before closing the meeting, the NBU Acting Governor outlined strategic goals for the regulator in the next year.
“In conclusion, I would like to share with you the goals that we have prioritized. Our list covers six goals plus one.
The first goal is a low and stable inflation rate.
The second is a stable, transparent and effective banking system.
The third is resumption of lending.
NBU is ready to take over the supervision of non-banking financial institutions. Our next goal is an efficient model of the financial sector regulation.
The fifth goal is free movement of capital. As I’ve mentioned before, we are taking all possible measures to liberalize the FX market and introduce a new FX regulation model.
Our sixth goal is financial literacy and inclusion. To ensure it’s full scale implementation we intend to amend the Law of Ukraine On the National Bank of Ukraine to obtain the necessary mandate, since financial literacy and inclusion of consumers of financial services is fundamental for financial stability.
And finally, we will continue our efforts to maintain the NBU status of modern, open, effective and independent central bank,” summarized Yakiv Smolii.