Yet Another Trophy from Central Banking Awards: Central Banks of Ukraine and Poland Win Currency Manager Category (updated)

The NBU and Narodowy Bank Polski have jointly won this year's Currency Manager category of Central Banking Awards. This award primarily goes to central banks that make outstanding achievements in cash circulation management.

This year, along with designating the NBU Central Bank of the Year and granting it the Payments and Market Infrastructure Development award, the Central Banking Awards selection committee has also acknowledged the NBU's and NBP's joint efforts to develop a mechanism for the emergency exchange of cash hryvnias for the currencies of countries that hosted the Ukrainians who had left Ukraine as they fled the war. 

"This recognition from Central Banking has highlighted the NBU's and its international partners' focus on protecting Ukrainians. Because of security risks and extremely difficult conditions, millions of our people, most of whom were women and children, had to flee their homes. We could not afford to leave these displaced Ukrainians to fend for themselves. They arrived abroad with only a minimum of belongings and what little hryvnia cash they could scrape together in a rush. They found themselves unable to convert the hryvnias into local currencies at a fair exchange rate. This prompted us to start looking for ways to resolve that problem," said NBU Deputy Governor Sergiy Nikolaychuk.

Aware of the situation's complexity and committed to find a way of converting the hryvnia into the host countries' currencies, the NBU in the earliest days of the full-scale war started to communicate about this with the central banks of the states that had sheltered Ukrainian displaced persons. Meanwhile, the first order of business was to sign an exchange agreement with Narodowy Bank Polski, as Poland was where most Ukrainians went. In the first month of the full-blown russian invasion, about 3.5 million people crossed the Ukrainian border, according to UN data. That includes the approximately 2 million Ukrainians who went to Poland.

As a result, one month into the full-scale war, the NBU and Narodowy Bank Polski managed to launch a cash-hryvnia-to-zloty exchange capability in Poland.

"This was the first time the NBU had made such an arrangement with a foreign central bank. We are extremely grateful to our Polish colleagues for their cooperation, support, and compassion towards Ukrainian displaced persons, who had to run for their lives as they fled the war. Through our joint efforts, these individuals were able to meet their vital needs. Our partnership with Narodowy Bank Polski also resulted in a hryvnia cash exchange program with nine other EU central banks that was unprecedented in scale. We implemented it precisely when it was needed the most," said Sergiy Nikolaychuk.

"We acted in the spirit of solidarity with our neighbour and took care of the macroeconomic stability in the region. While admiring our Ukrainian friends’ heroic attitude in the face of war and standing ready to offer further assistance, Narodowy Bank Polski is already looking forward to the times of peace that – let us all hope – will come soon, after the much expected victory of Ukraine," said Professor Adam Glapiński, Governor of Narodowy Bank Polski

The agreement between the Ukrainian and Polish central banks drew the attention of EU institutions to the pressing cash exchange problem and prompted the EU Council to recommend that EU member states introduce domestic mechanisms to facilitate the exchange of Ukrainian hryvnia banknotes for local currencies. It was about the capability to convert up to UAH 10,000 per person at a time. Details of the agreements were worked out separately with each partner central bank, but the general framework resulted from a model agreement that the ECB drafted based on previous arrangements between the central banks of Ukraine and Poland.  

As a result, the NBU concluded nine more agreements and launched the exchange of hryvnia cash in Germany, Sweden, Switzerland, Lithuania, the Netherlands, Belgium, Latvia, Italy, and Malta.

Through these programs, forced migrants were able to exchange about UAH 1 billion in cash in 2022. The amount came out much smaller than envisaged by the agreements with the central banks. This discrepancy is attributable to the fact that during the year, Ukrainians became increasingly confident in their banking system's ability to operate smoothly, relied less and less on cash, and opted for cashless payments instead.