You're reading: Lowering of limit for long currency position aimed at supporting hryvnia exchange rate, reducing inflation pressure

The lowering of the limit of the general open long currency position for banks from 20% to 5% by the National Bank of Ukraine (NBU) is aimed at supporting the hryvnia exchange rate and reducing inflation pressure, according to bankers polled by Interfax-Ukraine.

"The NBU reduced the limit of the general open long currency position, retaining the limit of the general short open currency position – this shows that the central bank is trying to support the hyrvnia exchange rate on the interbank market," Deputy Board Chairman of Kyiv-based Finance and Credit Bank, Serhiy Borysov, said.

Kyiv-based Diamantbank Board Chairman Oleksandr Rybalkin supports the opinion.

"The reduction of the open long currency position will force banks to sell foreign currency on the interbank. This is aimed at strengthening the hryvnia exchange rate and retaining the inflation pace," the banker said.

Deputy Board Chairman of Kyiv-based Premium Bank, Andriy Ponomariov, said that the lowering of the limit of the open long currency position as a whole will promote a fall in risks in the banking system.

"The NBU’s decision will lead to the shortening of the general currency position in the system. This would create extra supply of currency on the market in the short run and give a chance to the NBU to replenish international reserves. The measure will inflame the swap market development, as it is likely that extra currency liabilities will be exchanged to the hryvnia by banks on the swap conditions and it is unlikely that they will be transformed into the open short currency position. Thus, the revision of the limit of the open long currency position is intended to balance risks in the banking system," he said.

The director of the treasury at Kyiv-based Khreschatyk Bank, Oleksiy Kozyrev, believes that the NBU’s decision to revise the limit of the open long currency position restricts opportunities for speculative transactions on the currency market.

"When the NBU’s resolution takes effect, banks will calculate limits of currency positions every day and will not take into account average figures as they do today, which will lead to the strengthening of the regulator’s control over the observation of the said requirements by banks and the regulator. Thus, NBU strengthens control over currency transactions of banks on the market and actually does not allow banks to carry out speculative transactions," the expert said.
He said that 30 days given to banks to bring their indicators in line with the new requirements is enough for not having the large hryvnia exchange rate fluctuations