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Volodymyr Stelmakh, chairman of Ukraine’s central bank. In an interview with Ukraine’s Dzerkalo Tyzhnia newspaper published on June 28, Volodymyr Stelmakh, chairman of Ukraine’s central bank (National Bank of Ukraine), said Ukraine’s financial system was stabilizing after being shaken up hard by the global financial crisis and economic recession.

“We are facing a certain stabilization in the Ukrainian financial system over the last few weeks, firstly on the foreign [currency] exchange market,” Stelmakh said.

He said the central bank has bought up enough hard currency on the Interbank foreign exchange market recently, replenish its reserves. This, in turn, helped to strengthen the market and the official hryvnia exchange rates against the US dollar, by over 9 kopecks, from Hr/$ 7.7 to Hr/$ 7.61, or 1.2 percent, he added.

Rate stabilization has resulted from a more balanced trade balance, and less anxiety by the country’s population, Stelmakh said.

“Of course, the psychological aspect was one of the main factors behind hryvnia devaluation. The payment balance has showed an increase in cash currency outside the banks by $7.1 billion between November 2008 and April 2009,” he said.

The rate stabilization had a positive impact on depositors too, according to Stelmakh.

“Banks are gradually returning deposits. Compared with negative monthly deposit rates in this year's first quarter, deposit accounts were up by 0.6 percent and 0.7 percent in April and May respectively. So we have a slight but growing tendency towards increasing a number of customers' deposits.”

Deposits are being made both in national and foreign currency, Stelmakh added.

The situation in the Ukrainian banking system has also improved due to efficient measures taken by the National Bank, especially, target auctions for selling foreign currency to pay off individuals' loans, constant support for banks' liquidity, additional measures for stabilizing banks' operations and an adequate interest rate policy, the central bank chairman said.

In the same interview, Stelmakh said populist politics should be considered a serious threat to the stability of Ukraine’s currency and financial system.

“Politics today is the major threat which could lead to destabilization, precisely the revolutionary thrust of social populism that has captured the majority of our policy-makers,” he said.

“Unfortunately, we failed to raise the status of the national currency” enough to win over trust of citizens, he said.

“We can only guess how much [foreign] currency the population is keeping under their pillows,” the central bank chairman said.

Around $7 billion has been kept in the shadow market over the last half of the year, he added.