Ukraine’s central bank increases requirements for banks’ required reserves
This mechanism will encourage banks to expand their portfolio of domestic government bonds (Photo:Press center of the NBU)
The National Bank of Ukraine (NBU) has increased its requirements for banks’ required reserves, the central bank said in a press release on Dec. 8.
As noted, the NBU has increased the required reserve ratios for hryvnia and foreign exchange current accounts by 5 percentage points.
At the same time, the NBU will allow the banks to use benchmark domestic government debt securities to meet up to 50% of their total required reserve ratios.
The NBU will also decide separately on a list of securities eligible for meeting the required reserve ratios, on the basis of proposals made by the Finance Ministry.
It is noted the banks must start complying with new reserve requirements starting on Jan. 11, 2023, using domestic government debt securities to meet a portion of their required reserve ratios if they chose to do so.
“This mechanism will encourage the banks to expand their portfolios of domestic government bonds, lowering the risk of returning to the monetary financing of the budget deficit in 2023,” the NBU said.
In addition, after assessing the effectiveness of the above measures and changes in the banking system’s liquidity, the NBU will decide whether or not it should increase the required reserve ratios any further.
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