The Central Bank took measures to encourage banks to reduce the amount of funds in demand accounts, but at the same time affect the growth in the volume of time deposits in banks. In addition, the decision will enable banks to finance the budget deficit more actively without issuing them.
The Central Bank has further increased the requirements for banks’ required reserves. This should lead to a gradual increase in the volume of time deposits in banks, as well as an increase in deposit interest rates. This was announced at a press conference by NBU chief Andriy Pyshny on January 26.
“Increasing deposit rates in banks is a key goal for us, we are interested and will work as carefully as possible to increase the term supply in the banking system,” said Andrey Pyshny.
According to Central Bank experts, these measures will help reduce the excess liquidity in the banking system. As a result, the stability of the foreign exchange market to situational factors will increase and the Central Bank may continue to ease administrative restrictions for businesses and population in the future.
“The Central Bank had to change its traditional instruments of influence on the market. The increase in the discount rate lost its effect in June and the Central Bank was forced to raise the required reserve ratio by the banks. Banks are forced to hold significantly more funds in their current accounts with the NBU, but there is also the opportunity to invest instead in government bonds of certain issues. The purpose of this step is to encourage banks to increase their investment in public debt. This should allow the NBU to stop issuing hryvnia this year. – What helped the country so much last year will not work in the long run. Changes in reserve requirements should encourage banks to offer higher deposit rates to encourage their customers to deposit money in time deposits rather than current accounts. Focus The decision of the Central Bank financial analyst of the ICU group Mikhail Demkiv.
Thus, according to the NBU, from February 11, banks will increase by 5 points and loans from international (excluding financial) and other organizations. In particular, 5% to 10% in national currency and 15% to 20% in foreign currency. In addition, starting from March 11, the norms of establishing required reserves for both national and foreign currency demand funds and cash in current accounts of real persons will be increased by 10 points. However, this part of the reserves will not be covered by the benchmark-OVGZ coverage mechanism.
Previously Focus He wrote that since the beginning of 2022, the NBU has financed the state budget deficit by 355 billion UAH by issuing the hryvnia.
As reported, in October, the NBU offered banks to open deposits for citizens in dollars and, in reverse, hryvnia. However, the banks did not want to include the offer in their product line.
Source: Focus
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