On 31 March 2020, the Council of the National Bank of Ukraine approved the NBU’s consolidated financial statements for 2019. The statements were verified by Ernst & Young Audit Services, an independent audit firm.
According to an independent auditor’s report, the NBU’s consolidated financial statements reliably and in all material respects reflect the central bank’s financial position as of 31 December 2019, as well as results of its activities, cash flows and changes in equity, in accordance with International Financial Reporting Standards (IFRS).
The central bank’s total assets had by 31 December 2019 increased by about 1%, to UAH 1.060.8 trillion.
The NBU’s assets are mainly comprised of international reserves and Ukrainian securities.
- In 2019, international reserves grew by 21.5%, to USD 25.3 billion, due to favorable FX market conditions. When building up international reserves, the NBU is guided by the following three key principles: reliability, liquidity, and yield. International reserves include foreign securities with the highest international rating (mainly AAA-rated U.S. Treasury bonds), funds and deposits in foreign currency (cash, deposits and funds on correspondents accounts at other central banks and highly reputable commercial banks), and monetary gold deposits.
- The portfolio of Ukraine’s securities shrank by UAH 14.2 billion or by 3.9%, to UAH 347 billion.
The NBU’s liabilities mainly consist of banknotes and coins in circulation, and liabilities to the IMF.
- Banknotes and coins in circulation expanded by 6%, to UAH 426.3 billion.
- Liabilities to the IMF, which include loans received and liabilities arising from SDR allocations, declined by 19.6%, mainly due to loan repayments.
A substantial increase in the volume of NBU certificates of deposit (to UAH 151.9 billion) also affected the central bank’s liabilities. Banks used this instrument to manage the surfeit of hryvnia liquidity in the banking system. The surfeit of liquidity in the banking system increased in 2019, largely on account of the NBU’s active purchases of foreign currency.
The NBU’s equity dropped by 39%. This resulted mainly from the central bank’s using its revaluation reserves, due to a stronger hryvnia and from the cancellation of other provisions.
Overall, the NBU ended 2019 with a distributable profit of UAH 43.3 billion. The NBU will transfer the bulk of its profit (UAH 42.7 billion) to the state budget in 2020, as set forth in a schedule approved by the Finance Ministry. The remainder (about UAH 600 million) will be used to augment the NBU’s general reserves.
The main drivers of the NBU’s financial performance were interest income and interest expenses, exchange rate differences (the revaluation of monetary assets and liabilities due to changes in the hryvnia’s official exchange rate), and gains or losses on operations with financial instruments that are measured at fair value.
In particular, after the 2019 provisions were recovered, the central bank’s net interest income totaled UAH 22 billion (compared to UAH 34.9 billion in 2018).
Background information
The NBU compiles its consolidated financial statements in line with the IFRS. These statements provide information about the assets, liabilities and equity of the NBU and its subsidiaries and associated companies. They also contain information about the central bank’s comprehensive income, cash flows, significant accounting policies, and some additional information about its activities and financial risk management.
The independent auditor's report states an unmodified opinion, i.e. the NBU’s consolidated financial statements, in all material respects, provides reliable information about the central bank’s financial position, profits and losses, and cash flows.
In complying with the Ukrainian Law On Accounting and Financial Reporting in Ukraine, the NBU has also prepared an annual consolidated management report, apart from its consolidated financial statements for 2019. Since the 2018 reporting year, the NBU has been publishing this report together with its annual consolidated financial statements.