Parliament Approves Resignation of NBU Governor Yakіv Smoliі

Today the Parliament approved the president’s resolution to dismiss NBU Governor Yakiv Smolii, who filed for resignation on 1 July 2020, citing systematic political pressure. 286 Members of Parliament voted for him to step down.

“As the NBU has long been under systematic political pressure, I have made a difficult but necessary decision to resign. For months, the central bank has been pressurized to make decisions that are economically unsound, that focus on short-term, easy “victories,” and that could take a tremendous toll on the Ukrainian economy and people in the long run,” said Yakiv Smolii in his parliamentary address as he explained the reasons for leaving his post of his own volition.

“As governor, I have been safeguarding the NBU’s institutional capacity for more than two years. Together with the members of the NBU Board, we have been a shield that has protected our technocratic and apolitical institution from the influence of political forces. Over the past year, this shield has come under unrelenting pressure to give in. That includes pressure in courts, paid rallies at Instytutska Street and near the Board members’ homes, information attacks based on manipulation and lies, unfounded political assessments of the NBU’s policy and of my actions as governor, and use of the NBU Council to incite corporate conflict within the central bank. All these have been links in the same chain,” emphasized Yakiv Smolii.

“Does my resignation imply that the NBU has lost its independence? Not at all. My resignation comes as a protest. It is a signal and a warning that a red line is about to be crossed. As I step down as governor, I seek to warn politicians against further attempts to undermine the institutional foundations of the Ukrainian central bank. At this very moment, the NBU Board and several thousand top-of-the-line professionals continue to work at the NBU to promote the macroeconomic and financial stability of Ukraine and the institutional capacity of its central bank. However, it is crucial that their work goes on uninterrupted. It is imperative that the president, government, and political forces finally begin to work effectively with the central bank,” said Yakiv Smolii.

Yakiv Smolii was appointed NBU Governor on 15 March 2018. The following happened during his time in office:

• Inflation entered single-digit territory, reaching the 5% ± 1 pp target, and remained low.
• For the first time since Ukraine gained independence, the key policy rate has been reduced to 6%.
• An effective flexible exchange rate regime was introduced, and financial market infrastructure was modernized.
• Large-scale currency liberalization was launched.
• International reserves reached an eight-year high.

Today the banking system is healthy, highly liquid, and profitable. Not a single bank has been resolved since November 2018, and confidence in the banking sector is being restored. Furthermore, in the midst of the current crisis, the banking system has been an outpost of financial stability thanks to what had been accomplished on Yakiv Smolii’s watch since early 2018:

• Banks are adequately capitalized and constantly undergo stress tests.
• Macroprudential policy was introduced to shore up the banking system.
• Risk-oriented supervision of banks was launched.
• European banking standards were introduced.
• Financial monitoring was strengthened.
• Legislation was amended to improve the bank liquidation procedure, while resuscitation of “zombie” banks was made impossible.
• Disclosure of all bank owners was completed.
• Banks had the quality of their corporate governance improved.
• Protection of consumers rights in financial services was introduced.

Under Yakiv Smolii’s leadership, the NBU became a regulator of the nonbank financial market, optimized the banknote and coin series, ensured that the share of noncash transactions increased to 55%, brought the launch of the NBU Bank ID to its completion, adopted the IBAN, and shifted the SEP into 23/7 operating mode.

During these two years, the central bank never stopped evolving as an institution, with the result that:

• Strategic planning of the NBU’s activities was enhanced (publication of the NBU Strategy, NBU Action Plans, and reports covering the NBU’s performance was launched).
• Confidence in the NBU has been growing.
• The NBU’s Communications Strategy and Communications Management System were created.
• Professional dialogue with stakeholders – partners and clients – was taken to a new level.
• The NBU became the best employer in the financial market.
• The NBU was recognized the world’s most transparent central bank in 2019 (Central Banking Awards).
• The NBU governor was named the Best Central Banker in Central and Eastern Europe in 2019 (GlobalMarkets Award).

“I leave the NBU as an integrated institution that has a strategic vision, well-established processes, a strong professional team, and a good reputation among the world’s leading central banks and the international community. I’m leaving with my head held high. And I leave the NBU under your responsibility,” said Yakiv Smolii as he concluded his parliamentary speech and his nearly two years in office.