NBU: No Limit on Foreign Capital in Bank Sector, Stable Exchange Rate.

Volodymyr Stelmakh, chairman of the National Bank (NBU), said yesterday there was no basis whatsoever to rumors he had heard about a possible plan by the NBU to limit the involvement of foreign capital in the Ukrainian banking system. He said the NBU had no intention and no legal right to cap foreign capital, which would require a change in legislation. He also reaffirmed the NBU’s adherence to a stable hryvnya exchange rate policy. Alexander Viktorov: Stelmakh is the key decision maker on exchange rate policy. He is one of President Yushchenko’s closest allies, going back to the latter’s days as NBU chairman in the 1990s, and the NBU is still mainly under the president’s control (the chairman is dismissed and appointed jointly by the president and parliament, and its supervisory board’s members are appointed 50-50 by the president and parliament, with the chairman holding the tie-breaking vote). That and the improving current balance explains why the new government recently backed away from its initial calls for a devaluation and set its forecast of the average exchange rate in 2007 at 5.1/$, in line with the NBU’s forecast range of 4.95 to 5.25.