NBU from August 11 expands list of benchmark government bonds for banks to include in coverage of part of required reserves

The National Bank expands the list of benchmark government domestic loan bonds, at the expense of which banks can cover part of the volume of required reserves.

This is stated in the NBU message, Ukrainian News Agency reports.

Thus, from August 11, 2023, government bonds with an identification number (ISIN) of the UA4000228043, the first placement of which was made by the Ministry of Finance on July 25, 2023, will be added to the corresponding list.

According to the National Bank, such a step will further increase activity at the auctions of the Ministry of Finance on the placement of government bonds, which will allow continuing to avoid direct financing of the budget deficit by the National Bank.

Recall that from January 11, 2023, banks were able to credit a certain list of benchmark government bonds to cover up to 50% of the volume of required reserves.

The corresponding list is determined by the National Bank, taking into account the proposals of the Ministry of Finance.

From August 11, 2023, it will include eight issues of securities, seven of which were determined in January-May 2023 (UA4000227045, UA4000227094, UA4000227102, UA4000227185, UA4000227193, UA4000227201, UA4000227490 and new UA4000228043).

As Ukrainian News Agency earlier reported, mandatory reserves are one of the tools of central banks.

Its content is as follows: a bank is obliged to reserve funds on its correspondent account in the amount defined as a certain percentage of its obligations (reservation rate) and takes into account the share of required reserves that the bank covers at the expense of benchmark government bonds.

This amount should be generated on average during the reservation period.

This allows smoothing out possible conjunctural (unpredictable) fluctuations in liquidity, while ensuring the effective use of the instrument itself for its intended purpose - limiting part of the free liquidity of the banking system.

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