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NBU Clarifies Procedure for Granting Refinancing Loans to Support Bank Liquidity

NBU Clarifies Procedure for Granting Refinancing Loans to Support Bank Liquidity

The NBU has amended its procedure for providing refinancing loans to shore up the liquidity of banks, as the banking system’s liquidity has grown since the war broke out, the financial market has stabilized, and banks have been repaying refinancing loans ahead of maturity. 

Secured refinancing loans will be redeployed as a priority tool for bolstering bank liquidity, a role they played before martial law was imposed. 

To enhance banks’ capability to take out refinancing loans secured by domestic government debt securities, the NBU has simplified its approaches to the valuation of such securities. Effective 4 May 2022, the value of hryvnia and FX domestic government debt securities that are pledged as collateral will therefore be calculated without using a reducing adjustment ratio. However, this value will not exceed the nominal value of the security (for domestic government debt securities that undergo indexation, their value as collateral must not exceed their indexed value). 

At the same time, the NBU has expounded the conditions for obtaining blank refinancing loans. Starting 4 May 2022, access to these instruments will be available only for banks that have exhausted their capability to take out secured refinancing loans and lost more than 5% of their retail deposits to deposit outflows since 23 February 2022.

These changes are intended to normalize the use by the NBU of monetary instruments as it manages the money market by regulating the banking system’s liquidity. To cover potential deposit outflows, banks hold a sufficient stock of high-quality assets and have access to refinancing instruments secured by collateral.

The NBU is constantly monitoring the financial system’s liquidity and, if required, stands ready to take every step necessary to maintain it at the right level.

Changes to the procedure for obtaining blank refinancing loans were made by NBU Board Resolution No. 76 On Amendments to NBU Board Resolution No. 22 dated 24 February 2022, dated 19 April 2022 (UKR) and are effective 4 May 2022.

The option to change the adjustment ratios is stipulated by NBU Board Decision No. 190-D On the Application of Adjustment Ratios to Domestic Government Debt Securities under Martial Law (UKR), which is dated 19 April 2022, takes effect on 4 May 2022, and is to stay valid for six months from the date of suspension or termination of martial law or until decided otherwise.

For reference

The NBU has taken a number of emergency measures to safeguard the stability of the financial system since russia unleashed is full-scale war of aggression. Specifically, blank refinancing loans have been made available to banks so that they can retain their liquidity if retail deposit outflows from the financial system occur.

At the same time, the uninterrupted operation of the banking system, as well as the available stock of high-quality assets accumulated by banks, has made it possible to avoid liquidity shocks.


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