The National Bank of Ukraine (NBU) has included the I and J series bonds of the Kharkiv City Council and the L series bonds of the Lviv City Council into the collateral pool for refinancing transactions and permitted the use of these bonds by banks in their repo transactions with the regulator. This decision was backed by a preliminary examination of these securities and their issuers.
This decision is intended to expand bank instruments for managing liquidity. As a result, municipal bonds will become more attractive for institutional investors, facilitating the development of the securities market as a whole.
The mentioned changes are prescribed by NBU Board Decision No. 68 On Including Bonds Issues by City Councils in the Collateral Pool for Refinancing Transactions dated 23 February 2021, which entered into effect on 25 February.
In April 2020, the NBU included municipal bonds in the list of assets that may be pledged as collateral for refinancing transactions. At the same time, it was decided that the inclusion of municipal bonds in the collateral pool would have to be approved by a separate NBU Board Decision after concluding the examination of assets.
Adjustment ratios for municipal bonds that may be included in the collateral pool for refinancing transactions or used for repo transactions with the central bank were approved by NBU Order No. 648 dated 27 August 2020, which came into effect on 7 September 2020.
In September, the NBU included bonds of the Ivano-Frankivsk City Council (D series), bonds of the Kharkiv City Council (E, F, G, and H series) and those of the Lviv City Council (I, J, and K series) in the collateral pool for refinancing transactions and permitted the use of these securities in bank repo transactions with the regulator.