NBU from June 1 to start first stage of introduction of liquidity coverage ratio
The National Bank of Ukraine (NBU) from June 1, 2018 will start the first stage of the introduction of the new prudential requirement for banks – Liquidity Coverage Ratio (LCR).
The NBU said on its website that according to an NBU resolution dated February 15, 2018 on the introduction of LCR and NBU Board decision No. 201-shareholders on the approval of methods for calculating LCR, which will take effect on March 1, 2018, LCR will be calculated in the test mode from June 1, 2018. The test mode will last six months. From December 1, 2018, the LCR requirement will become mandatory. Banks will calculate it every day and report to the NBU on a monthly basis.
According to the report, the new requirement is introduced to support financial stability and increase resistance of the bank system to possible liquidity shocks.
LCR is the ratio of high-quality liquid assets of banks and its total net cash outflows over a 30-day stress period. It reflects resistance of banks to short-term liquidity shocks, which are typical for crisis periods when large outflow of clients' funds is seen.
Compliance with the requirement will indicate that banks have enough liquidity to fully fulfill its obligations over a 30-day stress period. Banks will have to comply with the LCR requirement both in national and foreign currencies.
According to EU standards, the coverage for banks is set at 100%. The period required to achieve this coverage by banks will be determined by the NBU according to the test calculations.
For a certain period of time, the instant liquidity (N4), current liquidity (N5) and short-term liquidity (N6) requirements will be in effect simultaneously with LCR, the NBU said.