The National Bank of Ukraine (NBU) will on December 1, 2015 introduce new regulations on the application of standard liquidity regulation instruments for the banking system, in particular, by cutting the upper time limit on providing refinancing credits at tenders from one year to three months as part of the switch to inflation targeting.

According to NBU resolution No. 615 of September 17 and explanations to it which were posted on the central bank's website on Wednesday, the NBU foresees multiplicity of applications for participation in tenders to place deposit certificates and to provide refinancing credits, which is aimed at increasing the flexibility of the NBU's transactions to manage liquidity.

The regulator said that at present each bank can only submit one application to participate in one tender, while from December 1, 2015 banks will be able to submit several applications with various parameters.

The regulator also optimized the list of collateral for refinancing credits, removing unpopular financial instruments, including mortgage bonds, securities of the State Mortgage Institution, and local loan bonds.

"In early December only government bonds of Ukraine, deposit certificates, five types of foreign currency (the U.S. dollars, euros, pound sterling, Swiss francs and Japanese yens) and bonds of international financial organizations will be used as collateral for refinancing credits," the NBU said.

Under resolution No. 615, it is permitted to partially repay or release collateral, while today banks can only release it when collateral is paid in full.

"With the purpose of reducing credit risk the NBU changed the approach to defining the cost of collateral on credits and credit truncations," the regulator said. The cost will be defined using market principles – using fair cost. The use of adjusting coefficients (discounts) applied to the fair cost of collateral depending on the securities used as collateral was settled with the same purpose.

A new requirement foresees the provision of additional collateral by banks if the fair cost of the assets used as collateral is lower than the limit.

A requirement to sign the single general agreement not only for overnight credits, but also for credits issued at tenders will be introduced, as at present only personal credit agreements are signed. This would allow for cutting the term of receiving funds from five days from the moment of the announcement of a tender to two days.