NBU Council may replace NBU board member on July 29

The Council of the National Bank of Ukraine (NBU) will
meet on July 29 to consider personnel questions, council member Vitaliy Shapran
told Interfax-Ukraine on July 27. He said he had no other details about the
agenda. By law, it is in the authority of the NBU Council to approve members of
the NBU management board (deputy NBU heads). Recall, last week, the NBU Council
approved Yuriy Geletiy, then deputy finance minister, to the position of deputy
NBU head. Geletiy, nominated by the new NBU Governor Kyrylo Shevchenko,
replaced Oleg Churiy, whose term as deputy NBU head was terminated in early
July. Recall, former NBU Governor Yakiv Smoliy tried to nominate Churiy for a
second term as deputy NBU head, but the NBU Council refused to approve this
nomination twice.

Shevchenko is considering various scenarios to replace
members of the NBU board in order to take control of it,  according to a
report published by the Ukrainian News information agency on July 25. The board
consists of six members, who approve all NBU regulations with simple majority
vote, with the governor’s vote being the tiebreaker.

The most likely option will be replacing board member
Roman Borysenko, which is likely to happen on July 29, according to Ukrainian
News. If that happens, Shevchenko will have three loyal votes on the NBU board
(himself, his nominee Geletiy, and the nominee to replace Borysenko), thus
securing his majority.

Alexander Paraschiy: In our
view, the scenario offered by Ukrainian News (replacing Borysenko) looks very
likely, taking into account that his firing won’t spoil Ukraine’s relations
with IFIs (he is not a core figure on the board). Moreover, he falls short of
Shevchenko’s announced key criteria for team formation being high
professionalism, in our view. Being an HR specialist, Borysenko is not
well-tailored for the position of central bank deputy head. Also, such scenario
is in line with our expectations that a new NBU head will soon take control
over the NBU’s decision-making process (though we expected no personnel
changes, just the recruitment of an existing board member).

It’s not clear whether the NBU’s program will change
(e.g. for a much softer monetary policy) after possible rotations in the board.
Recall, last week, the NBU board kept its key policy rate unchanged at
6%, while the overall expectation was that the new NBU
head will insist on continuing to cut rates. That decision added some optimism about the NBU’s continued independence,
in our view. However, that could have been the result of Shevchenko still
lacking a majority on the NBU board as of last week.