By KYIV. May 15 (Interfax-Ukraine) – Since May 11, the equalization of the norms for creating mandatory reserves by banks on deposits of individuals for a period of up to three months with the norms of mandatory reserves for individuals’ funds on current accounts led to an increase in total reserves by UAH 22 billion, while the National Bank at the end of March estimated a possible increase at UAH 17 billion.
According to information on the NBU website, from May 11 to June 10, the amount of required reserves would be UAH 298.9 billion.
As reported, the reserve requirement for fixed-term funds and deposits of individuals with an initial maturity of up to 92 calendar days (inclusive) for funds in the national currency from May 11 is 20%, and 30% for funds in foreign currency.
However, the reserve requirement for household deposits with a maturity of 93 calendar days will not change and will be 0% for funds in the national currency, and 10% in foreign currency.
Similar to the requirements for funds of individuals on current accounts, the mechanism for covering the benchmark government bonds will not apply to that part of the reserve requirements on deposits of individuals for up to three months, which corresponds to 10% of the reserve base.
In the inflation report, the NBU said that as of April 4, fixed-term deposits in the national currency for a period of three months or more totaled UAH 154.5 billion, or 26.9% of all deposits, for up to three months – UAH 40.4 billion, or 7%, while UAH 378.4 billion, or 66%, accounted for demand deposits.
As for fixed-term deposits in foreign currency, as of April 4, for a period of three months, they were worth the equivalent of UAH 95.1 billion, or 26.9% of all deposits, for up to three months – UAH 68.0 billion, or 19.2%, while UAH 190.4 billion, or 53.9%, accounted for demand deposits.
The NBU explained that the step is aimed at maintaining the effectiveness of the reserve requirements mechanism and strengthening market incentives for banks to attract time deposits of the population in UAH, which, in particular, will contribute to a further increase in interest rates on time deposits, and, accordingly, to strengthen the protection of UAH savings of citizens from inflationary depreciation.
In January-March 2023, the National Bank increased the overall reserve requirements for funds on demand and funds on current accounts of individuals by 20 percentage points (p.p.), and legal entities – by 10 p.p. In addition, the regulator allowed banks to cover part of the required reserves at the expense of benchmark government bonds.
As a result, since January 10 of this year, the required reserves grew by UAH 229.16 billion, or 4.3 times.
