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Public Consultation Under Way to Amend the Regulation on Setting the Official Hryvnia Exchange Rate

Public Consultation Under Way to Amend the Regulation on Setting the Official Hryvnia Exchange Rate

The National Bank of Ukraine invites the public to a debate on amendments to the Regulation On Setting the Official Hryvnia Exchange Rate against Foreign Currencies and Calculating the Reference Exchange Rate of the Hryvnia against the U.S. Dollar and Official Prices for Investment Metals.

The amendments include as follows:

  • adjusting approaches to cutting off deals with extreme parameters

In particular, the regulator proposes giving up practice of cutting off deals whose volume differs by more than two standard deviations from the simple arithmetic mean of a series of deals, which aims to reduce data loss when calculating the official/reference UAH/USD exchange rate. Instead, the regulator suggests an approach according to which the calculation of the official/reference exchange rate of the hryvnia is based on deals with the most relevant volume for the Ukrainian interbank market, namely from USD 0.1 million to USD 5 million.  The parameters of the most relevant volume of deals may be reconsidered in future along with any related changes on the foreign exchange market.

In addition, the regulator proposes that deals differing by 2% from the median of the initial series of deals rather than from the simple arithmetic mean of the initial series of deals be excluded from the calculation at Step 1 of the cut-off process

  • shifting the timing of data collection for calculating the official exchange rate of the hryvnia to foreign currencies and changing the time of its publication

The regulator suggests shifting the timing of data collection for calculating the official exchange rate of the hryvnia to foreign currencies (both for UAH/USD deals and BFIX benchmarks) from 3:30 p.m. to 3:00 p.m. Kyiv time. Thus, the official exchange rate to foreign currencies will be published before 3:30 p.m. Kyiv time (now it is before 4:00 p.m.)

  • determining the mechanism for calculating the reference value of the UAH/USD exchange rate under special conditions

The regulator offers to determine the procedure for calculating the reference UAH/USD exchange rate under special conditions in a similar way to the existing mechanism for calculating the official UAH/USD exchange rate under special conditions and to shift the control time of available deals to 11:30 a.m. Kyiv time.

It is worth mentioning that as of today such a mechanism is defined only for the calculation of the official UAH/USD currency exchange rate, while it is not defined for the reference UAH/USD exchange rate.

The respective amendments are designed, among other things, to:

  • reduce data loss when calculating the official/reference UAH/USD exchange rate at the stage of cutting off deals with extreme parameters. The recommendation was given by a technical mission as part of the Exchange Rate Evaluation Mechanism, launched with the support of the Swiss State Secretariat for Economic Affairs (SECO)
  • optimize the use of the official exchange rate of the hryvnia to foreign currencies as a financial benchmark when settling deals on the date when the rate is set – by shifting the timing of the data collection period for its calculation and publication
  • determine the mechanism for calculating the reference UAH/USD exchange rate under special conditions, which is necessary to reach the IOSCO compliance.

More detailed proposals, the rationale behind them, and analytical estimation can be found here

The respective proposals were approved by the Money and Foreign Exchange Market Indicators Oversight Committee of Ukraine on 15 July 2021 and by the Money and Foreign Exchange Markets Contact Group (2 August 2021).

Feedback on the proposed Amendments to the Regulation is expected until 28 November 2021 to the NBU’s official e-mail: nbu@bank.gov.ua. Please use the following e-mail subject line: Amendments to the Regulation on Official FX Rate.

When providing feedback please be noted that public inquiries filed with the NBU shall be in line with the Law of Ukraine On Appeals of Citizens. E-mails from enterprises, institutions, and organizations shall carry an authorized person’s qualified electronic signature.

For reference

The Regulation On Setting the Official Hryvnia Exchange Rate against Foreign Currencies and Calculating the Reference Exchange Rate of the Hryvnia against the U.S. Dollar and Official Prices for Investment Metals was approved by NBU Board Resolution No. 148 dated 10 December 2019 (as amended).

The IOSCO Principles are available in the document IOSCO: Principles for Financial Benchmarks Final Report July 2013.

 

 

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