Central bank further eases ForEx restrictions

The Council of the National Bank of Ukraine (NBU) approved on Nov. 22 extra ForEx liberalization measures including operations with foreign currency derivatives at stock exchanges, eased restrictions for resident-clients to purchase foreign currency at the ForEx, and expanded possibilities for banks to keep extra foreign cash. In particular, the NBU eased rules for banks on excessive foreign currency liquidity and enabled opportunities to purchase foreign cash for replenishing deposits at the accounts of international payment systems.

Also, the NBU allowed Ukrainian banks to purchase international debt securities that are rated no less than AA-/Aa3, and issued by international financial organizations and governments of G7 countries. The NBU claims that Ukrainian banks had USD 4.5-5.5 bln in highly liquid assets in foreign currency during 2016, with limited opportunity to earn on them.

Alexander Paraschiy: It’s positive to know the NBU is moving further along the ForEx liberalization course. The most significant changes are related to opened possibilities for Ukrainian banks to purchase international debt securities, which effectively gives the green light for commercial banks to start earning on accumulated foreign currency that they collect through saving deposits. Also, there is an interesting point about renewing foreign currency derivatives, which effectively returns the ability to conduct operations with foreign currency hedging instruments.

Still, the mere availability of the instruments will not create an operational market of hedging foreign currency risks. The key impediment is still the absence of a reliable market maker. The NBU still has this on its agenda and is even considering some first experiments with market makers for 2017. But everything will be developing gradually and we do not expect revolutionary changes in this area.