OREANDA-NEWS. Within the bounds of standard monetary procedures, the National Bank of Ukraine has developed a mechanism for providing emergency liquidity support to banks that would maintain public confidence in the banking system in the event of a deterioration in market expectations and facilitate its stable operation.

The above-mentioned mechanism envisages that the National Bank of Ukraine will offer extraordinary liquidity-providing tenders for banks that have seen a run on household time deposits with a maturity of up to 360 days. The decision to hold these tenders will be based upon an analysis of the money market situation and the state of the banking system liquidity.

The mechanism for providing emergency liquidity support to banks approved by Resolution of the National Bank of Ukraine Board No. 48 dated February 6, 2014, envisages, inter alia, the following:

the maximum amount of funds that a bank can obtain through this mechanism cannot exceed the amount of household time deposits withdrawn from the bank over the period established by the National Bank of Ukraine;

Ukrainian government bonds or foreign exchange (US dollar, euro, British pound sterling, Japanese yen, and Swiss franc) can be used as collateral for refinance loans granted through this mechanism;

an interest rate on refinance loans is set at the level threefold higher than the discount rate of the National Bank.

Commenting on the Resolution passed by the National Bank of Ukraine Board, Ms Olena Shcherbakova, Director of General Department of Monetary Policy, has pointed out that this mechanism is intended principally as a preventive measure.

“I want to stress that today we are not seeing a critical outflow of funds from banks. This mechanism is intended principally as a preventive measure. We want banks and the people of Ukraine, to be confident that, whatever happens, the banks are capable of fulfilling their obligations to citizens in a timely fashion and in full," emphasized Ms Olena Shcherbakova, adding that such confidence would underpin stability in banking activities even if market turbulence increased.