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EBA Meeting with Kyrylo Shevchenko, Governor of the National Bank of Ukraine

23/ 09/ 2020

Today, for the first time, the EBA business community met with the new head of the National Bank of Ukraine, Kyrylo Shevchenko. Members of the NBU Board also took part in an active dialogue with the business. During the 1.5-hour conversation, we managed to discuss some complex issues concerning the financial and banking system of Ukraine.

Thus, the meeting was focused on the further policy of the central bank. According to Mr. Shevchenko, the NBU will continue to cooperate with international financial organizations. In particular, the management of the National Bank expects the next tranche from the IMF by the end of 2020. It was noted that the NBU is actively working to fulfill its obligations to the International Monetary Fund, including the implementation of consistent monetary policy, revision of personnel policy in state-owned banks, solving the problem of salary gap in the public sector, and so on.

The business representatives have recently observed a tendency for the hryvnia to devalue, so there have been concerns about the predictability of the NBU’s monetary policy. However, Mr. Shevchenko and his colleagues assured that such fluctuations are seasonal, and the bank’s actions do not contradict the principles of flexible exchange rate formation. With the resumption of business activity in September, the demand for currency from importers increased. To address this imbalance, the central bank has released $ 160 million for foreign exchange interventions over the past 10 days, which is below the volume of interventions in other peak periods. As for inflation, it is expected to remain within the 5% (+ -1%) corridor.

In the context of currency liberalization, it was noted that the limits on international currency transfers will be increased provided Ukraine reaches the adequate level of macroeconomic indicators of economic growth, namely GDP, inflation, and financial stability. At the same time, the free movement of capital requires the existence of appropriate regulatory conditions, in particular, the adoption of a number of anti-offshore laws under the BEPS program, as well as amendments to the Law “On Financial Services and State Regulation of Financial Service Markets”.

The NBU’s plans to keep the key policy rate unchanged at 6% per annum as a part of its mild monetary policy, which contributes to further reduction of rates in the financial sector. Also, to increase the liquidity of the banking system, the state-owned banks are currently working on the reductions of bad debts. All these incentives, together with the renewal of the relevant legal framework, will encourage the development of the credit market, including mortgage loans.

It was also reported that the NBU will gradually implement the strategy of fintech development in Ukraine. The priority now is to create an effective regulatory ecosystem and increase public involvement in testing Open Banking projects. To this end, the National Bank has developed a draft law “On Payment Services” which will be registered at the Verkhovna Rada in the near future. At the same time, according to Mr. Shevchenko, the adoption of the European directive PSD2 will be scheduled for next year. Besides, the NBU supports the development of the remote identification systems, the national payment system “Prostir”, the API solutions, the cybersecurity technologies, and other tools that provide customers with convenient and secure access to banking services.

The business community welcomes the fact that the NBU has a detailed step-by-step strategy for the development of Ukraine’s financial market and banking system. We hope that the National Bank, despite the challenges of the second wave of coronavirus, will continue to move in the predicted direction for the business.

On behalf of the European Business Association, we thank the participants for a constructive meeting and look forward to continuing the professional dialogue!

 

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