Current operational design working well – dpty NBU governor
The current operational design for the "lower bound" system is working well, and there is no need to change it at this time, Deputy Governor of the National Bank of Ukraine (NBU) Volodymyr Lepushynsky stated in an interview with Interfax-Ukraine.
"The operational design has a clear utilitarian function – to ensure the attractiveness of hryvnia assets. At every monetary policy committee meeting, we analyze whether everything is working properly or if something needs to be adjusted. There’s no point in making any quick changes now," he said.
The deputy head recalled that under the current operational design of the "lower bound," the main operation is overnight deposit certificates, the rate of which is equal to the key rate, and the additional instrument is higher-yield three-month deposit certificates, in order to motivate banks to actively work with depositors.
Lepushynsky also noted that hryvnia deposits remain attractive: growth is expected to be 20% in 2025, and another 4.6% since the beginning of the year. This means that the National Bank is providing incentives for banks to attract deposits. Banks are fulfilling this objective and, accordingly, can purchase three-month deposit certificates within the limit.
He explained that the main reason for the liquidity surplus, which then ends up in the National Bank’s deposit certificates, is the significant budget deficit, which is financed by international partners. Moreover, the dominant trend is increasing liquidity, as the National Bank purchases more foreign currency from the government than it sells on the market.
"But sometimes the opposite happens. For example, in March, the volume of deposit certificates decreased due to increased net demand on the foreign exchange market. Consequently, we sold more foreign currency than the hryvnia equivalent we issued to the government in exchange for foreign currency," the Deputy Governor of the NBU noted.
Lepushynsky noted that the idea that deposit certificates hinder lending is speculative, as loans are growing by over 30% annually.
"Deposit certificates perform the same function as in other central banks with a two-tier banking system. They enable us to set the price of money, and this price is reflected in our key interest rate. Because the price of money is sufficient, hryvnia deposit rates are attractive, public demand for this instrument remains, and potential demand for foreign currency is limited," he concluded.