As previously announced, the National Bank of Ukraine has raised the required reserve ratios by 5 pp for demand deposits and current accounts in order to strengthen monetary transmission.
The required reserve ratio will increase from 0% to 5% for banks for the following hryvnia accounts:
- corporate and retail demand deposits and current accounts
- deposits and current accounts of other nonresident banks, as well as loans issued by international institutions (other than financial institutions) and other nonresident organizations.
The required reserve ratio will increase from 10% to 15% for banks for the following foreign currency accounts:
- corporate and retail demand deposits and current accounts
- deposits and current accounts of other nonresident banks, as well as loans issued by international institutions (other than financial institutions) and other nonresident organizations.
However, the required reserve ratio will remain unchanged for term deposits of corporate and retail clients: 0% for hryvnia deposits, and 10% for FX deposits.
Considering the effective procedure for creating the reserves, the banks are to start complying with the new reserve requirements from 11 January 2023.
Raising the required reserve ratios will reduce spare liquidity in the banking system. The total required reserves held by banks are expected to increase by about UAH 68 billion. The NBU estimates this will:
- promote competition between banks for depositors and push up interest rates on hryvnia deposits in the future
- increase volumes of hryvnia term deposits with banks
- reduce risks to exchange rate stability
- drive the de-dollarization of deposits and increase the NBU’s capability to keep inflation under control.
Higher reserve requirements for banks will not threaten financial stability considering record-high volumes of spare liquidity in the banking system. This will not limit banks’ capacity to issue loans either.
The announced option for banks to cover 50% of required reserves with benchmark domestic government debt securities will be approved by a separate NBU decision, which, among other things, will take into account proposals of the Ministry of Finance of Ukraine.
The increase in required reserve ratios was approved by NBU Board Decision No. 587 On Amendments to NBU Board Decision No. 752 dated 23 November 2017 dated 16 December 2022, which comes into effect on 10 January 2023.
All the information on the size of required reserves to be made by banks is available here.