The National Bank of Ukraine is gradually phasing out its anti-crisis monetary measures in line with the announced schedule. The following changes will apply from 1 July:
- A reduction in the maximum maturity of long-term refinancing loans and a limit on relevant tenders
The NBU approved the schedule of tenders to provide liquidity assistance to banks for over 14 days for Q3 2021. The frequency of the tenders remained unchanged: refinancing tenders for up to 90 days will be held every Friday, and long-term refinancing tenders will take place every second Friday. The maximum maturity of long-term refinancing loans will be reduced from five to three years.
Moreover, volumes of long-term refinancing tenders will be limited. The tender will be capped to UAH 5 billion when it is held on 9 July, UAH 4 billion on 13 August, and UAH 3 billion on 10 September.
- A reduction in the frequency and maximum term of interest rate swap auctions
The central bank also approved the schedule of interest rate swap auctions for Q3 2021. The frequency of the auctions will be reduced from two times per month to once per month. Their term will decrease from five to three years. The next interest rate swap auctions will thus take place on 28 July (for the term of three years), 18 August (for one year), and 29 September (for two years).
At the same time, the maximum notional amount offered at the auctions remained UAH 500 million.
More detailed parameters and results of interest rate swap auctions and long-term refinancing tenders will be published on the NBU’s official website.
- An increase in the maturity of certificates of deposit
The maturity of certificates of deposit will return to its pre-crisis level, increasing from 7 to 14 days.
The change to the operational design of the monetary policy was approved by NBU Board Resolution No. 64 On Amending the Regulation on the NBU’s Interest Rate Policy dated 29 June 2021 and takes effect on 1 July 2021.
In March 2020, the NBU launched long-term refinancing for a term of up to five years to maintain financial stability and support the economy. As of 30 June 2021, UAH 82.1 billion in such loans was issued to banks.
In addition, in March the NBU changed the maturities of liquidity regulation instruments. The maturity of two-week certificates of deposit was decreased to one week, while that of short-term refinancing loans was increased from 14 to 90 days.
In July 2020, the NBU introduced interest rate swaps, with a view to boosting long-term lending by banks. Overall, as of June 30 2021, the NBU held 20 such auctions, entering into agreements with banks worth a total of UAH 18.9 billion.
In June 2021, the NBU announced its plans to gradually phase out anti-crisis monetary instruments, in particular, long-term refinancing and interest rate swaps. These instruments provided additional support to the banking system and lending during the most difficult period of the crisis and at the early stage of economic recovery. However, they become irrelevant as the economy returns to steady growth and the financial market stabilizes.