The National Bank of Ukraine (NBU) will double the limits on foreign exchange long and short positions of banks to 10% of the regulatory capital. This will expand banks transaction options on the interbank FX market by USD 400 million, and increase their role in alleviating excessive rate fluctuations on the account of bank position.
According to the NBU estimates, preliminary increase in limits on foreign exchange position of banks in mid-2018 had no negative effect on the FX market of Ukraine and did not increase the pressure on hryvnia. On the contrary, the volume of transactions on the interbank FX market increased and exchange rate volatility subsided.
Last year, banks barely used a half of the effective limit on long position (5%), however some financial institutions occasionally required a larger open foreign exchange position. At the same time, such institutions were restricted by the limit and were prevented from playing a bigger role in smoothing out exchange rate fluctuations.
Respective amendments were approved by NBU Board Decision No. 10 On Amendments to Decision of the Board of the National Bank of Ukraine No. 184 dated 29 March 2018 dated 9 January 2019 and enter into effect on 20 January 2020.