Banking system transition to liquidity deficit won't affect its stability
The transition of the banking system to a liquidity deficit expected in 2019 will not affect its stability, Dmytro Solohub, the deputy head of the National Bank of Ukraine (NBU), has said.
"This is a natural process [changing the system's deficit to surplus and vice versa]. When the system is in surplus, banks place additional liquidity in the National Bank's deposit certificates. When deficit occurs, banks will be able to cover it through NBU refinancing under the security of highly liquid assets - government domestic loan bonds and currency. We are trying to convey this to the market so that this transition is easy," he said in an interview with Interfax-Ukraine.
According to him, the deficit expected next year is due to substantial payments on the state debt of Ukraine against the background of the situation in foreign markets, where liquidity is currently quite limited for emerging markets. It won't entail a reduction in lending to the economy.
"Lending and liquidity deficit are not connected in any way. The NBU's monetary policy is based on setting prices for money, not their quantity. Accordingly, lending rates do not depend on the level of liquidity but on the level of interest rates," the banker said.