The National Bank of Ukraine has streamlined an approach to operations with standard liquidity management instruments for the banking system.
With the aim of ensuring efficient execution of such operations, the NBU has amended the Regulation on the Application by the National Bank of Ukraine of Standard Liquidity Management Instruments for the Banking System approved by NBU Board Resolution No.615 of 17 September 2015.
In particular:
- First, from now on, the NBU will enter into agreements with banks under operations on placement of CDs in the form of a public offer to conclude a Single Agreement for the provision of Banking and Other Services by the NBU. The application of this legal framework that will replace individual contracts entered into between the NBU and banks will simplify procedures for executing documents and accelerate the process of amending such contracts.
- Second, the regulator has streamlined the rules governing operations on placement of NBU CDs. Going forward, the NBU will accept bids submitted by banks for the participation in operations on placement of NBU CDs/a quantitative tender without announcing the total amount of funds raised by the NBU and send notifications to banks on the acceptance of bids once bids are received and not after the call for bids is closed as is the case now.
- Third, the NBU has repealed a requirement for banks to comply with the procedure for the formation and maintenance of mandatory reserves to participate in operations on placement of NBU CDs. This move was prompted by changes in approaches to the application of enforcement measures against banks for non-compliance with reserve requirements. In particular, non-compliance with reserve requirements is currently regarded as unauthorized disbursement of a loan at a penalty interest rate.
- Fourth, banks are allowed to pledge mixed collateral against overnight loans. In other words, collateral may include Ukrainian government bonds, NBU CDs and bonds issued by international institutions.
Also, amendments to the Regulation will authorize the NBU to verify the powers of persons that submit banks’ bids for the participation in liquidity management operations using software applications, including the use of e-signature.
The amendments to this effect were approved by NBU Board Resolution No. 16 On Some Issues related to the Application by the National Bank of Ukraine of Standard Liquidity Management Instruments for the Banking System. The amendments shall take effect from 1 July 2017.