Speaking in a round-table debate attended by representatives of the banking community and experts, Ms Olena Shcherbakova, Director of General Department of Monetary Policy of the National Bank of Ukraine, said that presently it was not so much underlying macroeconomic factors as geopolitical factors and sentiments that had a bearing on the domestic foreign exchange market.

“At the start of the year, the National Bank of Ukraine deliberately opted for a flexible exchange rate regime, which best fits in our country, and allowed the market forces to determine the exchange rate based on the results of trading on the interbank foreign exchange. The central bank intentionally does not intervene in the foreign exchange market as it deems it inexpedient to manipulate the market benchmark, which would serve as a starting point for market players, and undermine all its previous policy efforts,” noted Ms Olena Shcherbakova.

“The National Bank of Ukraine has foreign exchange interventions as a tool at its disposal, but presently there is no need to resort to it. Signs of stabilization in the foreign exchange market and signals that we expect to hear soon from different international financial institutions are bound to put the country's economic situation back on track,” she said.

At the same time, the National Bank of Ukraine has taken a number of conventional economic measures to stabilize the situation. “We have raised the discount rate, streamlined the norms of banking supervision and foreign exchange control, ensured the banking system liquidity, and set up an independent Audit Committee. In addition, preparations for stress-testing exercises to assess the resilience of Ukrainian banking institutions are under way,” explained Ms Olena Shcherbakova.

In order to placate emotional swings in depositor behavior, the National Bank of Ukraine has taken steps to provide immediate liquidity support to the banking system. “We have stepped up conventional refinancing operations carried out through both regular and extraordinary liquidity-providing tenders and offering overnight loans. To make banks feel comfortable, the regulator has lifted restrictions on the number of bids submitted by banks to the National Bank of Ukraine to obtain overnight loans. The National Bank of Ukraine has also introduced two new instruments designed to provide liquidity support to those banks that suffer a bank run,” said Ms Olena Shcherbakova.

Since early April, deposit withdrawals have slowed. This trend points to the efficiency of this policy. Moreover, an increase in household deposits attracted by banks has been recorded in the past few days. In addition, according to the Director of General Department of Monetary Policy, the amount of cash foreign exchange that individuals sold to banks outstripped the demand for foreign exchange by USD 250 million as of April 22, 2014.

In addition, Ms Olena Shcherbakova pointed out that there was a drastic fall in the total turnover of foreign exchange transactions due to a number of factors, including the imposition of pension insurance fund duty on purchases of foreign currency.