National Bank of Ukraine imposes restrictions on foreign exchange transactions

06.02.2014

On the 6^th of February, 2014 information according to which the Management Board of the Bank of Ukraine passed the Resolution №49 "On measures for banks and currency transactions" appeared on the official website. As the press service of the NBU states, this ruling is temporary and only proactive.

The purpose of this Resolution of the NBU, according to the Management Board, is to protect the interests of depositors and other creditors. National Bank has taken steps to maintain balance in the currency market. Thus, the NBU expanded its presence in the interbank market and used its available mechanisms and instruments of monetary stabilization. As it was noted in press release, these steps had a positive effect, but their effectiveness was limited because of the adverse effects of a number of external and internal factors, such as the sharp devaluation of the national currency in the group of countries with emerging markets.

According to opinion of the management of the NBU, the Resolution №49 will promote stability of banking system of the country, will provide timeliness of bank transactions, including foreign trade contracts and related to them economic activity. Also, the Resolution №49 increases the probability of forecasting of peak demands in the currency market, improves conditions of financial monitoring and does not limit the use of incomes and savings by citizens.

The Resolution enters into force in 7^th of February, 2014

Based on: http://www.bank.gov.ua/control/uk/publish/article?art_id=5434311&cat_id=55838

Expert’s opinion

During 2012-2013 the Government headed by Azarov kept a stable rate of hryvnia at the expense of the National Bank's foreign currency reserves. However, during this period the government has adopted a series of measures that have sharply reduced the inflow of foreign investments.

The decline in GDP and in industrial production, widening gap between import/export and the growing level of public debt provoked an exchange rate crisis in 2014, which was expectable. Those economists, who urged to abandon hardliners and to allow a smooth transition to a market rate of hryvnia, were not heard by the Government.

The political crisis acted as a catalyst which launched devaluation of the hryvnia. Will the restriction of the NBU to reassure Ukraine's banking system?

Yaroslav Lomakin ( Managing partner of Honest & Bright” company)