Net sales of dollars by the National Bank of Ukraine (NBU) increased to $977.3 million last week from $862.5 million a week earlier, the last time the NBU sold more in the first week of the transition to managed exchange rate flexibility in early October.
In the first half of the week, according to the central bank, purchases of foreign currency by bank clients grew, reaching $475 million on Wednesday and exceeding sales by $260 million.
As a result, the NBU on Wednesday weakened the hryvnia by 0.6%, or 23 kopecks, and in total for the first three days of the week – by 1.4%, or 53 kopecks.
On Thursday, however, the depreciation was very slight, and on Friday the NBU even strengthened the exchange rate by 4 kopecks to 37.5525 UAH/$1.
Overall, since November 26, when the national currency began to weaken, the dollar has risen by 4.3%, or UAH 1.54. At the same time, due to the strengthening of the hryvnia in the first time after the National Bank switched to a managed flexibility regime on October 3, the dollar rose by 2.7%, or 98 kopecks, against the fixed exchange rate that had been in effect for more than 14 months.
On Friday, the dollar also fell slightly on the cash market – by 11 kopecks, to about 38.10 UAH/$1.
As reported, the National Bank’s net sales in November fell to $2.46 billion from $3.34 billion in October and $2.69 billion in September. However, the reduction in external financing to $2.04 billion led to a decrease in international reserves for the fourth consecutive month – by 0.5%, or $187.8 million, to $38 billion 785.2 million.
The portfolio of domestic government bonds (government bonds) of Ukrainian banks increased by UAH 4.355 billion (by 0.7%) – to UAH 632.116 billion, legal entities – by UAH 2.404 billion (by 1.8%) – to UAH 135.172 billion, individuals – by UAH 0.321 billion (by 0.6%) – to UAH 51.515 billion.
According to the NBU, the total portfolio of government bonds increased by UAH 7.087bn (by 0.5%) – to UAH 1554.292bn from UAH 1547.205bn a day earlier, in the ownership of the National Bank and therobschina remained unchanged, non-residents – changed slightly.
The official exchange rate for December 21 – 37.5516 UAH/$1
The National Bank of Ukraine’s (NBU) net sales of dollars in November, the second month after the country switched from a fixed exchange rate regime to a managed flexibility regime, fell to $2.45 billion from $3.34 billion in October, even less than the $2.69 billion in September.
According to the central bank’s website, its purchases of foreign currency remained minuscule at $4 million, compared to $14 million in October and $1 million in September.
For its part, the Ministry of Finance reported that in November, the budget received $2 billion in grants and external concessional financing, compared to $2.8 billion in October. In particular, $1.6 billion was provided by the European Union and $0.4 billion by the World Bank with a guarantee from the UK.
In November, the hryvnia exchange rate on the interbank market weakened by only 0.2%, or 7 kopecks, to UAH 36.3535/$1 at the beginning of December, while from the end of July 2022 to October 3 this year, the National Bank maintained the official exchange rate of UAH 36.5686/$1.
In the cash market in November, the dollar fell by about 35 kopecks to 37.40 UAH/$1.
In total, since the beginning of this year, the NBU has purchased $217.1 million in the market, while selling $24 billion 811.9 million.
The National Bank of Ukraine (NBU) has developed a regulation on the transition of the Ukrainian insurance market to European standards to bring insurers’ activities in line with Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the establishment and conduct of insurance and reinsurance activities (Solvency II).
According to the NBU’s website, the regulation on establishing requirements for insurer solvency and investment activities has been developed and proposed for public discussion and consists of two main blocks.
The first block includes requirements for ensuring solvency, in particular, establishes the procedure for calculating regulatory capital and eligible regulatory capital, taking into account restrictions on the composition and structure of eligible assets for their calculation, as well as the procedure for calculating solvency capital. Thus, the minimum capital under the simplified approach for certain categories of insurers, in particular, life insurers and non-life insurers with significant volumes of activities, is set at the level of at least UAH 48 million, and for others – UAH 32 million.
Insurers will apply a simplified approach to calculating solvency capital based on insurance premiums, insurance claims, technical reserves, etc. until 2027.
The second block includes requirements for the insurer’s investment activities, including assets to cover technical reserves and restrictions on investment.
The NBU notes that the regulation will come into force on January 1, 2024, and will provide for a six-month period for insurers to bring their activities in line with the new requirements. After that date, the NBU will not apply any enforcement actions to insurers for violating solvency requirements if they implement their recovery and/or financing plans.
Comments and suggestions on the draft are accepted until December 18, 2023.
The EU Solvency II Directive primarily concerns the amount of capital that insurance companies must hold to reduce the risk of insolvency. The next steps to strengthen the solvency requirements for insurers in Ukraine, according to this directive, will be to determine the procedure for assessing certain categories of eligible assets and to introduce requirements for calculating solvency capital and minimum capital under the basic approach for certain categories of insurers from 2027.
The National Bank of Ukraine (NBU) has revoked the licenses of six financial institutions and removed two from the State Register and two from the Register of persons that are not financial institutions but have the right to provide certain financial services.
According to the regulator’s website, based on their own applications and submitted documents, all existing licenses were revoked and they were excluded from the State Register of Financial Institutions: Lombard “Capital Credit” Shevchenko and Company, LLC, A.T. Finance, LLC, FC Euro Premier Finance.
In addition, all existing licenses were revoked at the request of Lombard Regional PA, Zlatodar 585 PE and Company, and FC Fly Finance LLC, and FC Atlanta LLC was excluded from the State Register of Financial Institutions and Leasing Company Agrofund LLC was excluded from the Register of Persons that are not financial institutions but have the right to provide certain financial services.
They were also excluded from the State Register of Financial Institutions: Instant Lending Service LLC – due to the NBU’s decision to revoke all existing licenses and FC Sun-Rise Financial LLC – due to the absence of financial services licenses for three months.
Due to the fact that SE “Spetsagroleasing” does not have a valid license to provide financial services, the company was excluded from the Register of persons that are not financial institutions but have the right to provide certain financial services.
The NBU Committee on Supervision and Regulation of Non-Banking Financial Services Markets made these decisions at a meeting on October 20, 2023.
The National Bank of Ukraine (NBU) proposes to raise the corporate income tax rate from 18% to 38% in 2023-2024, NBU Governor Andriy Pyshnyi said.
“Our forecast is that additional budget revenues if the current rate is raised to 38% will total more than UAH 20 billion this year and next year,” he wrote on Facebook.
According to him, such a tax design will have a limited impact on macrofinancial stability and at the same time support Ukraine’s defense capabilities.
The NBU governor, citing the monitoring of the financial condition and the results of the assessment of the banks’ stability, believes that financial institutions are quite capable of making additional payments in the current environment. According to the regulator, the tax rate increase will have a limited impact on lending and deposit rates, given the banks’ sufficient margins.
As reported, the National Bank considers additional taxation of banks to be a justified temporary step in view of the war, seeing financial and legal grounds for this, but proposes to increase the tax rate on banks’ profits instead of taxing net interest income as proposed by MPs.
According to Pyshnyi, this is the version the NBU will discuss with the Parliamentary Committee on Finance, Taxation and Customs Policy in the near future.
He also said that the market participants with whom the central bank communicated were sympathetic to this position.
According to the NBU, the net profit of 64 operating Ukrainian banks in the first seven months of this year amounted to UAH 83.2 billion, while the income tax was UAH 14.4 billion, including UAH 34.4 billion and UAH 7.9 billion for PrivatBank, and UAH 18.8 billion and UAH 0.1 billion for four other state-owned banks.
In late August, MPs submitted to the Rada a bill to tax banks’ net interest income at a rate of 5% in 2024-2026 (in addition to corporate income tax), which could bring in about UAH 10 billion to the state budget next year, according to their estimates. In the first half of 2023, banks’ interest income reached UAH 141 billion, including UAH 73.5 billion from transactions with government securities, and net interest income for the same period amounted to UAH 93.6 billion, up 75% compared to the pre-war period of 2021.
