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Banks’ FX Position Limits to Be Raised by 50%

Banks’ FX Position Limits to Be Raised by 50%

As of 1 December 2021, the NBU will increase the limits on banks’ open long and short FX positions from 10% to 15% of their regulatory capital.

The NBU projects that the higher limits will expand by about USD 400 million the banks’ ability to conduct interbank transactions within their FX positions. This will contribute to the banks’ greater role in smoothing out excessive exchange rate fluctuations on the FX market and enhancing liquidity and market depth in general.

The said change was approved by NBU Board Decision No. 573 dated 16 November 2021 On Amendments to NBU Board Decision No. 184 dated 29 March 2018 and takes effect on 1 December 2021.

For reference

The previous changes in the limits on the open FX position took place in January 2020. Banks’ long and short FX position limits doubled to 10% of their regulatory capital.

These changes had no negative impact on the FX market. Furthermore, they boosted interbank transactions: the average daily volume of transactions between banks, including deals with the NBU, increased by 11% in 2020 and by another 9% in 2021 (as of 17 November).

 

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