The NBU has extended the deadlines for core transactions to regulate bank liquidity. Specifically, the central bank has increased the duration of transactions to grant refinancing loans to banks during weekly tenders to 90 days from 30 days. The first such extended tender will take place next Friday.
The NBU has also expanded the list of items that the banks can pledge as security when taking out refinancing loans. In particular, an eligible collateral pool may include government-guaranteed corporate bonds and municipal bonds. The banks will also be able to use these securities in repo transactions with the NBU. In both cases, the NBU Board will make separate resolutions to decide whether to include these assets in a collateral pool or a repo transaction. Final decisions will be made after the NBU Board has reviewed the quality of these assets.
These changes primarily aim to maintain the banking system’s liquidity at a healthy level as the economic fallout from the coronavirus pandemic and quarantine restrictions continues to weigh on business activity and the confidence of businesses and households. These measures will support the real economy, as will the long-term refinancing loans with up to five years’ maturity that are to be launched in May.
“Over the last month, the NBU has been actively developing a set of tools to support the economy. These tools will enable the NBU to provide banks with greater access to financing, which they could use for lending to the real economy. This should increase the stimulus provided by the cut in the key policy rate cut. The NBU seeks to enable banks to help the economy get back on track for growth once the quarantine is lifted,” said NBU Governor Yakiv Smolii.
These changes were approved by NBU Board Resolutions No. 53 On Amendments to the Regulation on the Interest Rate Policy of the National Bank of Ukraine, dated 23 April 2020, and No. 54 On Amendments to the Regulation on the Application by the National Bank of Ukraine of Standard Instruments to Regulate the Liquidity of the Banking System, dated 23 April 2020. The resolutions take effect on 27 April 2020.