NBU Regulates Currency Interventions In New Form

The National Bank of Ukraine (NBU) has established a regulatory framework for introducing a new form of currency interventions-request for the best rate-in line with the recently approved Strategy of NBU Currency Interventions for the years 2016-2020.

Ukrainian News Agency learned this from an NBU's statement.

An advantage of the new form is the speed of its application.

If the currency auction, actively used by the central bank now, is the most successful form of intervention to accumulate international reserves than the intervention with a request of the best rate is the most efficient tool for smoothening the functioning of the interbank foreign exchange market.

The new form of interventions allows promptly responding to changes in the situation at the FX market.

The process of the request is as follows: first, the NBU requests the banks' price for buy/sell of foreign currency through Trading Information Systems (TIS).

Then, the regulator concludes an agreement with the bank that quoted the bets price.

For such requests, the NBU will select banks under such criteria: the bank must be on the list of 20 banks that had the biggest extent of buy/sell currency transactions with other interbank market players and the regulator in the previous quarter.

At the beginning of each quarter the NBU will email banks the list of banks entitled to participate in such currency intervention in the running quarter.

The above changes were made effective by Resolution 397 of the NBU Board of October 28, 2016.

It took force on October 29.

As Ukrainian News Agency earlier reported, the NBU Board has endorsed the Strategy of NBU Currency Interventions for 2016-2020.

It determines the policy of presence of the central bank at the interbank FX market amidst inflation targeting and preservation of the mechanism of formation of the flexible exchange rate of the Hryvnia.