Business news from Ukraine

NATIONAL BANK OF UKRAINE ASSESSES FIRST TRANCHE UNDER NEW IMF PROGRAM AT $1.5-1.9 BLN

The amount of the first tranche under the new Stand-By Arrangement (SBA) with the International Monetary Fund (IMF) could be $1.5-1.9 billion, First Deputy Governor of the National Bank of Ukraine (NBU) Kateryna Rozhkova has said. “We recently had a monetary briefing where the NBU Governor Yakiv Smolii said that the tranche could be received by the end of this year. As for the sum [of the first tranche], I think that it would be some $1.5-1.9 billion,” she told reporters at the BEPSinUA forum in Kyiv on Thursday.
As reported, the International Monetary Fund (IMF) staff and Ukraine have reached an agreement on economic policies for a new 14-month Stand-By Arrangement (SBA), which will replace the arrangement under the Extended Fund Facility (EFF), approved in March 2015 and set to expire in March 2019.
The agreement is subject to approval by the fund’s management and approval by its board of directors. The board’s meeting is expected to take place at the end of the year after the Verkhovna Rada adopts the national budget for 2019 in accordance with the recommendations of the IMF and the increase in gas and heating tariffs for households, reflecting market trends while maintaining support for low-income consumers.

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NATIONAL BANK EXPECTS FIRST IMF TRANCHE UNDER STAND-BY ARRANGEMENT TO BE PROVIDED THIS YEAR

Governor of the National Bank of Ukraine (NBU) Yakiv Smolii does not rule out that a first tranche under the new Stand-By Arrangement (SBA) from the International Monetary Fund (IMF) could arrive this year. “For the time being we cannot talk about exact deadlines, since the decision will be made by the IMF board. We expect it to take place in December, and we can expect to receive a tranche this year,” he said at a monetary briefing in Kyiv.
As reported, the International Monetary Fund (IMF) staff and Ukraine have reached an agreement on economic policies for a new 14-month Stand-By Arrangement (SBA), which will replace the arrangement under the Extended Fund Facility (EFF), approved in March 2015 and set to expire in March 2019.
The agreement is subject to approval by the fund’s management and approval by its board of directors. The board’s meeting is expected to take place at the end of the year after the Verkhovna Rada adopts the national budget for 2019 in accordance with the recommendations of the IMF and the increase in gas and heating tariffs for households, reflecting market trends while maintaining support for low-income consumers.

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NATIONAL BANK OF UKRAINE PLANS TO SETTLE CYBER DEFENSE IN SPHERE OF MONEY TRANSFER

The National Bank of Ukraine (NBU) plans to first settle the issue of providing the proper level of cyber defense and cybersecurity in the sphere of money transfer.
The respective initiative is contained in the draft resolution of the NBU approving the regulation on cyber defense and cybersecurity in payment and settlement systems, the text of which was posted on the regulator’s website for public discussion.
In particular, the draft resolution provides for determining the requirements for the payment market players in building an cyber defense and cybersecurity system, the procedure for detecting cyber attacks that reduce the reliability of payment and settlement systems, as well as the requirements for organizational and technical measures to ensure the protection of information and cybersecurity by the payment market players.
The regulator said that this document is based on the requirements and recommendations of national and international cybersecurity standards, as well as modern approaches to cyber defense and cybersecurity that are universally accepted in international practice.
The adoption of the draft resolution will allow minimizing the number cyber incidents in the sphere of money transfer, regulating the use of cybersecurity tools, increasing the reliability of the functioning and efficiency of payment and settlement systems, speeding up the modernization of payment systems, taking into account modern cybersecurity technologies.
Comments and proposals for the NBU draft document will be accepted until October 27.

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NATIONAL BANK OF UKRAINE TIGHTENS RESPONSIBILITY OF BANKS FOR INEFFICIENT RISK MANAGEMENT

The National Bank of Ukraine (NBU) intends to impose restrictions on certain types of bank operations in case if the bank’s risk management system is recognized as ineffective. The document comes into force on September 11, 2018. The regulator may also require the bank to suspend or terminate certain types of transactions.
The final decision will be made based on the evaluation of the viability of the bank’s business model, analysis of the provided actual and forecast balance sheet data, profit and loss statements, transactions with related parties, and regulatory capital components.

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NATIONAL BANK SETS TARGET INFLATION AT 5% FROM DECEMBER 2019

The National Bank of Ukraine (NBU) has set a target inflation rate at 5% from December 2019.
This is stipulated in the NBU’s monetary policy strategy approved by the NBU council in July and posted on the regulator’s website on Tuesday.
“The best benchmark for inflation (the Consumer Price Index year-over-year) … is determined by the NBU at 5% ± 1 pp. The phase of reducing the inflation target from the current level to 5% will take place until December 2019. And since December 2019, this goal set at % will be constant and can only be revised downwards if the volatility of the hryvnia forex rate reduces, reference prices change and the effects of the convergence of the Ukrainian economy are lowered to the level of the countries that are major trading partners,” the document says.
According to the strategy, in certain periods, inflation may deviate from the established benchmark because of the influence of factors not subject to the NBU’s monetary policy. For example, it could be a change in commodity prices or a deviation of administratively regulated prices from the previously declared level. However, the NBU, as before, will use monetary tools to return inflation to the target numbers, it said.
The document also stipulates the application of the interest rate corridor for overnight credit and deposit transactions to manage short-term interest rates of the interbank credit market by limiting their fluctuations around the key interest rate. It also provides for the possibility of applying differentiated mandatory reserve requirements to improve the effectiveness of regulating the liquidity of the banking system and encouraging banks to raise funds primarily in the national currency and for a longer period.
The NBU monetary policy strategy confirms the need for institutional independence of the regulator. It says that the NBU should avoid any form of fiscal dominance, including direct or indirect support of budget expenditures.
As reported, the document is the successor of the NBU’s monetary policy strategy for 2016-2020, which was approved by the board of the central bank in August 2015.
The new monetary policy strategy retains key elements of the inflation targeting regime, defines the main objectives of the monetary policy, the principles, tools and directions of their evolution for the medium term. At the same time, the specifics of the application of the monetary policy tool will be reviewed annually, taking into account the state and risks of the external and internal macroeconomic environment, and will be approved by the NBU Council in the annual Monetary Policy Fundamentals.

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NATIONAL BANK DEVELOPS RECOMMENDATIONS FOR RELAXING REGISTRATION OF INTL PAYMENT SYSTEMS OF NONRESIDENTS

The National Bank of Ukraine (NBU) has drawn up recommendations for submission of document with the purpose of agreeing on conditions and the rules of operation of an international payment system, the payment organization of which is nonresident, in the country, the central bank has reported on its website.
“This document is intended to support partnership relations with payment market players and simplify the process of preparing documents that, in accordance with the law, are sent to the National Bank of Ukraine for registration of an international nonresident payment system,” the NBU said.
The recommendations include the procedure for issuing and submitting documents to the NBU, a description of the provisions that should contain the documents, as well as a list of Ukrainian legislative acts and documents of international organizations that should be used to submit documents to agree on the terms and conditions of the international payment system.
Payment organizations of international payment systems have the right to carry out activities in Ukraine only after their registration by entering information about them into the register of payment systems, settlement systems, participants in these systems and payment infrastructure service operators, which is kept by the NBU.
The NBU enters information into the register on the international payment system, the payment organization of which is a nonresident, after agreeing the conditions and the order of the activity of this payment system in Ukraine.
Currently, the register contains information on 10 international nonresident payment systems, of which three are international card payment systems and seven are international money transfer systems.

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