The National Bank of Ukraine invites the public to a debate on amendments to the Regulation On Calculating and Publishing the Ukrainian Overnight Index Average (UONIA) (hereinafter referred to as Amendments to the Regulation).
The respective amendments provide for calculating UONIA as a weighted average of deals volumes in order to mitigate an excessive impact on the benchmark of deals of certain banks at the rates that substantially differ from the average market ones. As a reminder, Now UONIA is calculated as the arithmetic mean.
In addition, it is proposed that the primary sample used for UONIA calculations should include the following :
- deals between banks with the most relevant volume for the Ukrainian interbank market: from UAH 10 million to UAH 200 million (at present all interbank deals are included into the primary sample). The parameters of the most relevant volume of deals may be revised in future if any related changes have place in the money market
- 10% of the banks’ deals concluded with the NBU on placing overnight certificates of deposit being in the middle of the classified by volume deals’ range (at present, while calculating the arithmetic mean without taking into account the volume of deals, the calculations are based on 10% of any such deals of their total number)
- 10% of the banks’ deals concluded with the NBU on overnight refinancing loans being in the middle of the classified by volume deals’ range (at present, while calculating the arithmetic mean without taking into account the volume of deals, the calculations are based on 10% of any such deals of their total number).
Besides, it is proposed to increase the number of criteria for calculating UONIA under special conditions by adding to the applicable two criteria (minimal number of deals and minimal quantity of counterparties) the criterion “Volume of deals available for calculation ≤ 10% of the average daily volume in the previous month”.
The updated methodology for calculating UONIA provides that calculations of the benchmark will continue including 10% of total number of banks’ deals with the NBU, both for placing overnight certificates of deposit and overnight refinancing loans. This decision was taken in spite of the conclusion made by the IMF technical assistance mission (April 2021) that the approach did not comply with the principles stipulated by IOSCO: Principles for Financial Benchmarks Final Report July 2013. Said decision was made considering that excluding of those agreements from calculating UONIA could cause problems in calculating the benchmark under the basic methodology due to the insufficient number of interbank deals.
Upon approval of the Amendments to the Regulation above, the NBU intends to define the strategy of transferring to calculating UONIA without taking into account the deals between banks and the central bank. It provides for calculating each six months the cases where UONIA (subject to exclusion of deals with the NBU) would not be calculated according to the basic methodology in the previous twelve-month period due to low activity of the market participants. If by results of two consecutive analyses of calculations it appears that the methodology of calculating UONIA under special conditions would be used less than twice per six months, then the issue of transferring to calculating UONIA without taking into account the banks’ deals with the NBU will be considered.
More detailed proposals, the rationale behind them, and relevant analytical calculations can be found at.
The Amendments to the Regulation were prepared in order to lessen the benchmark’s sensitivity to the actions of the certain market participants due to the narrowness of the domestic interbank market.
The respective proposals were approved by the Money and Foreign Exchange Market Indicators Oversight Committee of Ukraine on 15 July 2021 and by the Money and Foreign Exchange Markets Contact Group (2 August 2021).
Feedback on the proposed Amendments to the Regulation is expected until 28 November 2021 to the NBU’s official e-mail: [email protected]. Please indicate Amendments to the Regulation on UONIA in the subject field of your letter.
When providing feedback please be noted that public inquiries filed with the NBU shall be in line with the Law of Ukraine On Appeals of Citizens. E-mails from enterprises, institutions, and organizations shall carry an authorized person’s qualified electronic signature.
The Regulation On Calculating and Publishing the Ukrainian Overnight Index Average (UONIA) was approved by NBU Board decision No. 405 dated 16 June 2020 (as amended)