The National Bank of Ukraine has put its 2020 Action Plan into the public domain. The action plan is a road map for implementing the central bank’s mid-term Strategy in the current year. Approved in 2018, the Strategy ensures transparency, predictability, and consistency of the NBU’s activities, while annual roadmaps are the benchmarks for measuring its efficiency and the basis for reporting to the public, customers, and stakeholders.
The new 2020 Action Plan identifies priority actions on the way to achieving each of the NBU’s seven strategic goals: low and stable inflation, a stable, transparent, and effective banking system, resumption of lending, effective regulation of the financial sector, free flow of capital, financial inclusion, and a modern, open, independent, and effective central bank.
“Implementing the 2020 Action Plan will help ensure a favorable environment for all participants of the financial ecosystem. This is particularly important given that 2020 is the last year of the current NBU Strategy, and in parallel with its implementation, the regulator will work to create a new NBU Strategy with a planning horizon until 2025,” the Action Plan reads.
The NBU’s priorities for 2020 are as follows:
Improvement of interactions with the government of Ukraine within the framework of the Memorandum between the Cabinet of Ministers of Ukraine and the National Bank of Ukraine on Cooperation to Achieve Sustainable Economic Growth and Price Stability.
Facilitating efficient operation of state-owned banks, in particular by updating state-owned banks’ strategies in line with NBU recommendations.
Introducing legislative changes to simplify lending, promoting the adoption and implementation of legislative changes concerning the development of the secondary market for NPLs.
Securing the acceptance of land as collateral by banks without restriction, taking into account agricultural land circulation legislation.
Implementing the law on Split, designing a model for regulating the market of nonbank funancial institutions by segments, drafting new laws On Financial Services and Rendering Financial Services, On Insurance, and On Credit Unions, launching an efficient system for regulation and supervision of the nonbank financial sector.
Implementing the BEPS Action Plan and promoting the adoption of draft laws on countering tax base erosion. Their adoption and implementation will enable a total currency liberalization in Ukraine.
Opening an account for Euroclear ICSD at the NBU’s depository. This will improve accessibility to hryvnia government securities for foreign investors.
Implementing the action plan on improving the financial literacy of Ukrainians, as the NBU received the relevant legal mandate last year.
Improving regulation and introducing requirements for banks and other financial institutions on disclosing information on financial services to consumers and protecting consumer rights in financial services.
Continuing the NBU’s development, including improving technology, information infrastructure, and ensuring a high level of process digitalization.
At the same time, the NBU has presented a 2019 progress report on the Strategy according to seven strategic goals.
The main achievement was getting inflation into the target range. Consumer inflation slowed to 4.1% in 2019 from 9.8% in 2018. Thus, based on last year’s results, the NBU achieved the midterm inflation target of 5% ± 1 pp set in 2015. It was mainly attributed to the consistent monetary policy.
Due to the steady decline in inflationary pressure, the NBU was able to lower the key policy rate five times, from 18% to 13.5% in the course of one year. In order to advance the transparency and predictability of monetary policy for market players, businesses, and the public, the NBU began publishing its own key policy rate forecast.
Due to the macroeconomic stabilization, investors’ interest in hryvnia financial instruments increased while the Ukrainian economy’s productivity grew considerably. The inflow of foreign currency to Ukraine also increased, allowing the regulator to buy almost USD 8 billion from the market over the year. The purchased amount is five times the amount bought during the previous year, and the international reserves reached a seven-year high.
The banking sector has reached record-breaking profitability for the second time in six years. Bank profits for 11 months of 2019 reached UAH 59 billion, three times the previous year’s level. In particular, 70 out of 75 banks in the market were profitable. Last year, no banks were removed from the market due to insolvency.
Banks continued to increase their lending to households. In November 2019, the hryvnia retail loan portfolio rose by 24.7% to UAH 168 billion. Additionally, appropriate conditions to revive business lending emerged.
Last year, the Law of Ukraine On Currency and Currency Operations entered into force, giving a green light to currency liberalization. The NBU eased or eliminated around 40 FX limits and restrictions on currency transactions for businesses, banks, foreign investors, and general public.
The NBU also had its mandate extended: the Ukrainian parliament adopted respective laws enabling the central bank to protect consumer rights in financial services, increase financial literacy, as well as regulate and supervise a large number of nonbank financial institutions.
Ukraine entered 2020 with good news from the International Monetary Fund: a three-year extended fund facility program had been agreed upon at the technical level. The projected program is aimed at supporting reforms in Ukraine. This is a clear signal for investors and our partners about the actual implementation of the much needed structural reforms in Ukraine.
See the link for the full text of the NBU’s 2020 Action Plan.