The National Bank of Ukraine (NBU) has held a meeting with top managers of Ukraine’s largest banks. Due to the quarantine, the meeting took form of a conference call. It was dedicated to the operation of the banking system and financial markets under quarantine and emergency situation declared in some regions.
The entire lineup of the NBU Board represented the NBU, and the banking system was represented by more than 50 banks. Banking associations also took part in the meeting.
At the start of the meeting, NBU Governor Yakiv Smolii emphasized the importance of supporting communication between the NBU and banks and between banks and their customers.
"Raising awareness is the best way to prevent panic. We are constantly cooperating with all state authorities and our foreign colleagues. We have direct contacts with the European Central Bank. And we continue active talks with the International Monetary Fund regarding the new Extended Fund Facility. In addition, we hold consultations with the IMF on the possibility to receive financing under emergency assistance mechanisms developed by the IMF in order to help low-income and developing countries, which suffer the most from the coronavirus epidemic. Results of the talks will be known in the coming weeks," said the NBU Governor.
First Deputy Governor Kateryna Rozhkova drew attention to practical aspects of banking sector operation during this period. She reminded that the NBU eased banking regulation by postponing stress testing and implementation of capital buffers and by cancelling on-sight inspections. The NBU also plans to put off the deadline for banks to submit their annual financial statements and move the assessment of banks’ business models.
Ms Rozhkova paid special attention to loan servicing by borrowers. The NBU takes the following stand on this issue: a grace period can be applied during the quarantine to all loans which were performing and serviced as of the evening of 7 March 2020. This will not affect banks’ capital.
"Customers get nervous and ask to introduce effective restructuring approaches. You should start working now. Our regulations, particularly Resolution No. 97, cover restructuring and grace periods. Banks can take an individual approach for corporate borrowers and a standard one for retail customers. A special approach is needed to those economic sectors that are losing their entire income and have closed down, as well as to individuals temporarily out of work due to quarantine measures and ceased operation of some companies," underlined Kateryna Rozhkova. She reminded that the previous day the parliament satisfied the NBU’s proposal to forbid banks to charge fines and penalty interest on past due consumer loans throughout the period from 1 March to 30 April.
In addition, Ms Rozhkova pointed out that fighting the virus of panic was especially important under current conditions. Therefore, banks should impose no restrictions on customer transactions. "The NBU is against restrictions. Sound communication with customers should be used instead of them. Banks also should regularly refill ATMs with cash and ensure operation of their branches in all regions. This especially concerns the largest banks,” she said.
Deputy Governor Oleg Churiy spoke about the latest steps to change the operational design of monetary policy, which would make banks more flexible in managing their liquidity, and the implementation of long-term refinancing to support lending and bank liquidity. In such a way the NBU is maintaining the banking system’s health and ability to continue performing its main function of supporting the economy. This is important today and will remain important after the quarantine is over, when the economy returns to its normal functioning.
Mr Churiy mentioned the lack of foreign currency cash in banks.
"Today banks have foreign currency liquidity on their correspondent accounts. However, they lack cash due to disrupted flight connections. This issue will be solved soon: we have already purchased a portion of foreign currency cash in the euro, and tomorrow we plan to hold an auction to sell the foreign currency cash for noncash. We are also working with our US counterparties to receive a large batch of the US dollar," he added.
When speaking to the bankers, Deputy Governor Sergii Kholod announced the cancellation of tariffs for providing cash to banks and the temporary cancellation of tariffs in the System of Electronic Payments (SEP).
"While the quarantine is in place, we must focus on remote operations and online payments. We should make cashless payments cheaper than paying with cash," stressed Mr Kholod.
Interchange tariffs must be lowered as well, which should be done administratively. Today banking services should be provided remotely in order to ensure the social responsibility of the banking system.
During the quarantine declared to prevent the pandemic in Ukraine, the NBU will hold such dedicated online meetings with the banking community at least once every ten days.