(Adds analyst comment)
KIEV Feb 6 Ukraine's central bank said on
Thursday it had introduced restrictions on certain types of
foreign exchange purchase to help defend the stability of the
banking system at a time of volatility in the currency market.
In measures it said followed efforts to stabilise the
hryvnia in recent weeks - during which political conflict in
Ukraine has alarmed investors - the National Bank of Ukraine
also said it would be offering extraordinary tenders to support
banking liquidity, with funds available up to 360 days.
The bank, which has used reserves intervening in the market
but has failed to prevent a 10-percent slide in the hryvnia
since November, did not publish full details of the measures in
two news releases issued long after banks closed for the day.
It said restrictions on foreign exchange purchases would not
limit payments for education and healthcare abroad, transfers
for people moving their country of residence or the payment of
salaries of non-residents in Ukraine.
However, international bankers said such restrictions would
disrupt trade and could create a parallel market in the
Ukrainian currency, which the central bank has been struggling
to hold steady on a dollar peg. The hryvnia fell below 9 per
dollar on Wednesday for the first time in five years, though it
steadied on Thursday to be fixed at 8.9838 per dollar.
"Taking account of the volatility in the hryvnia exchange
rate and tensions in the currency market, the National Bank of
Ukraine has taken a range of measures in recent weeks to support
its equilibrium," the central bank said.
"Notably, the National Bank of Ukraine has increased its
presence in the interbank market and has used the mechanisms and
instruments it possesses for currency stabilisation.
"These measures have had a clearly positive effect. However,
they had a limited effect due to the unfavourable effect of a
variety of internal and external factors, including the sharp
devaluation of the national currencies of the group of emerging
market countries," the bank said in its statement.
The restriction on currency purchases would, it said,
"facilitate the stability of the national banking system".
Timothy Ash of Standard Bank said that if the central bank
was trying to "balance" the market, then "it's not really a
"This is just a sign of desperation and will further the
scarcity of FX, disrupt trade and economic activity, and make an
already difficult situation that much worse. The danger is that
this just creates a parallel market," he said.
"Further, the move will hardly win friends and influence
people at the IMF, who have long been calling for a more
flexible exchange rate regime," Ash added.
In a separate statement, the bank said it had, within the
bounds of standard monetary procedures, created a mechanism for
supporting bank liquidity that would maintain public confidence
in the banking system in the event of a deterioration in market
expectations and facilitate its stable operation.
The director of the bank's monetary policy department, Olena
Shcherbakova, said: "I want to stress that today we are not
seeing a critical outflow of funds from banks. This mechanism is
intended principally as a preventive measure.
"We want banks, and the people of Ukraine, to be confident
that, whatever happens, the banks are capable of fulfilling
their obligations to citizens in a timely and complete manner."
Such confidence would underpin stability in banking
activities even if market turbulence increased, she said.
Collateral for refinancing could include Ukrainian state
debt or foreign currencies, including dollars, euros, British
pounds, yen and Swiss francs.
(Reporting by Alastair Macdonald in Kiev and Sujata Rao in
London; Editing by Andrew Heavens)