Due to the new reserve requirements, banks will have to reduce flexible deposit rates with the ability to withdraw and replenish, as well as offer new products – extended 7- and 14-day deposits.
New required reserves for banks, recently approved by the Central Bank, will lead to an increase in banks’ hryvnia and foreign currency time deposits. Banks will increase interest rates on time deposits in hryvnia by 2-3.5 percentage points due to new required reserves. And if today the interest rate on deposits for six-month individuals in large banks of Ukraine in the TOP-20 is 7-12.5% per annum, then by the end of February the rates will rise to 9-15% per annum . Rates will be even higher in medium and small banks – around 18-19% per year. writes about it Focus “Money is getting expensive. Who benefits from the new rules for banks and why will deposit rates rise?”
As a result of tightening required reserves for banks, 7 and 14-day short-term deposits will appear in the market. Rates at banks for such deposits will likely be 0.2-1.5 points. higher than medium-term and long-term deposits. The whole point is The NBU has increased the reserve ratio for funds in current accounts of individuals and legal entities, which makes large amounts of client funds in card accounts and deposit accounts “on demand” unprofitable for banks.
Sergiy Kucheryavy, head of the liquidity and securities department at Kredobank, says the increase in reserve requirements will reduce the attractiveness of client funds in current accounts for banks, and the appropriateness of withdrawing funds in foreign currencies, including euros, will often be questionable. . Well, there is a high probability that some banks will decide to abandon a product such as a current account in foreign currency (primarily accounts in euros).
“It is becoming profitable for banks to offer their customers time deposits rather than current accounts and “on demand” funds. And, among other things, by raising deposit rates and updating the assortment – for example, it becomes profitable for banks to offer short and ultra-short deposits (7 days, 14 days) with automatic extension.“, — says Evgeniy Dubogryz, CASE Ukraine Associate Specialist.
Ivan Svitek, chairman of the board of directors of Unex Bank, states that the decision of the NBU to tighten reserve requirements could radically change the situation in the market.
“In times of such major crises, people prefer to create a financial cushion of safety but also want to maintain free access to their funds. That’s why we see the following phenomenon: While individuals’ funds in bank liabilities grew at a record pace despite the war, the share of on-demand funds in the total fund portfolio rose to almost 70% last year. individuals. It is clear that the editor must influence the situation for its part, but I think one should be very careful here. As a result, excessive increase in required reserves will adversely affect the profitability of the banking system. And this is a very important issue,” said Ivan Svitek.
According to Ivan Svitek, An increase in reserve requirements will lead to a sharp decrease in the attractiveness of “on demand” funds for banks. In addition, banks are likely to increase interest rates on time deposits.
Previously Focus He wrote that despite the 0.1% annual rate of this type of deposit, a dollar-converted deposit is popular.
Recall, in order to reduce the influence of money in the banking system on the exchange rate and price growth, the NBU decided to tighten the requirements for required reserves of banks.
Source: Focus
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