The NBU will conduct tenders to support bank liquidity for up to 90 days each week on Fridays. Tenders to provide long-term refinancing of one to five years will be held once a month every second Friday of the month. This tender schedule will apply for the period from 30 April to 30 June 2020.
As a reminder, the NBU has increased its support of bank liquidity in order to counteract the negative impact of the epidemic and quarantine on the economy and the financial sector. First, the NBU raised the frequency of liquidity support tenders and increased the term of loans from 30 to 90 days. Second, it expanded the list of eligible collaterals that banks can provide to receive refinancing loans. Third, it introduced new instruments, including long-term refinancing for a term of one to five years.
The first tender to provide long-term refinancing will be held on 8 May, and the next one on 12 June. The first tender to support bank liquidity for up to 90 days will be held next Thursday, as Friday is a nonworking day. Afterwards, the tenders will take place in line with the usual schedule.
The interest rate on long-term refinancing loans and refinancing loans for up to 90 days will be floating and will equal the NBU’s key policy rate, which was set at 8% effective 24 April. In order to stimulate the economy, the NBU decided not to include a fixed variable (constant value) in the cost of these loans, setting it at zero.
Refinancing loans will be granted through volume tenders without limitation of volume. The volume of refinancing will be limited only by liquid collateral banks can provide, which may include domestic government debt securities, NBU certificates of deposit, and foreign currency. In near future, this list will be supplemented with corporate bonds secured with government guarantees and municipal bonds.
"Thanks to the banking system cleanup held in 2014–2016, today we have a stable banking sector. Banks' liquidity now stands at more than UAH 200 billion and around USD 8 billion. This allows banks to service all payments in the economy without any interruptions. However, we provide banks with an additional tool to support their liquidity in the event of a deterioration in financial markets, while also encouraging them to increase their lending to businesses and infrastructure projects," said Oleg Churiy, Deputy Governor of the NBU.
The schedule and terms of refinancing tenders were approved by NBU Board Decision No. 301 On Tenders to Support Bank Liquidity for a Term of More Than 14 Days dated 28 April 2020 and NBU Board Decision No. 302 On Approval of a Constant Value Used to Determine the Interest Rate on Refinancing Loans Issued for More Than 14 days dated 28 April 2020.
Both resolutions enter into force on 27 April.