A regular meeting of the NBU Council has been held. The meeting addressed a number of issues. In particular, the participants adopted the Monetary Policy Fundamentals for 2014, discussed the situation regarding the operation of banks in the Autonomous Republic of Crimea and the city of Sevastopol, as well as NBU financial figures for 2013 and 2014.

 While discussing monetary policy, the NBU Council concluded that last year monetary policy was conducted in keeping with the Monetary Policy Fundamentals for 2013.

In the first quarter of 2014, with the view of ensuring that banks meet their obligations to depositors on time, the National Bank took steps to maintain bank liquidity at a sufficiently high level.

The National Bank was also involved in efforts to enhance the intrinsic value of the hryvnia through interest rates, and to regulate foreign exchange transactions by imposing temporary restrictions on foreign currency purchase.

In January - March 2014, in order to make the economy and the financial system more resilient to externalities it was decided to adopt a flexible exchange rate regime.

At the meeting, the Monetary Policy Fundamentals for 2014 were approved. The fundamentals will be posted on the NBU’s official web site in the coming days.

“In 2014, the National Bank will take steps to stabilize the financial and banking sector and maintain CPI growth within the limits set by the government’s forecast,” said Chairman of the NBU Council Stanislav Bukovynskyi.

“To the extent that the National Bank meets its main goal, it will support the government’s efforts to put the economy back on the track to growth, primarily by promoting banks’ lending to the real economy and cutting interest rates,” he added. With the view of fostering economic growth through a build-up of funds in the financial system, the National Bank will work on promoting cashless payments next year.

Based on the meeting’s results, the NBU Council has given a number of recommendations to the National Bank, including

• requiring that banks’ shareholders show collective responsibility for stabilizing the banks’ activity;
• initiating stricter control over banks’ compliance with foreign exchange laws and taking appropriate action in response to breaches of these laws;
• considering the possibility of decreasing the limit of cash settlement to UAH 100,000 for individuals;
• increasing its involvement in efforts to raise the awareness of individuals and economic entities regarding the National Bank’s actions; 
• communicating monetary policy decisions among all financial regulators and the government more effectively, and taking joint action to address risks to economic development;
• operating a monetary policy that will help banks restore their funding base and make it easier for banks to repay refinancing loans on time and in full.

The NBU Council has also recommended that the NBU Board and Ukraine’s Cabinet of Ministers establish a financial stability committee or council. It should act as a coordinating body between Ukrainian authorities and consist of top managers from the National Bank, Ukraine’s Ministry of Finance, Household Deposit Guarantee Fund, National Commission on Securities and the Stock Market, and State Financial Services Commission. This will make it possible to maintain financial stability, identify and discuss systemic risks, and take action if these risks materialize.

While talking about the central bank’s income and expenditure, NBU Governor Stepan Kubiv said that, given the country’s difficult economic situation, recently a decision had been made to suspend some of the National Bank’s capital expenditures.

“In close cooperation with the Council’s Audit Committee, we will develop and launch an effective action plan to cut expenditure related to the central bank’s non-statutory functions,” said Kubiv.