In April CASE Ukraine think tank held a discussion Financial System of Ukraine in Wartime Setting. Are Banks Ready to Lend?

The event featured deputy NBU Governor Serghiy Nikolaychuk, CASE Ukraine Banking Expert Yevhen Dubohryz and was moderated by CASE Ukraine Director Dmytro Boyarchuk. Keynote points of the discussion and abridged expositions of speaker reports are published below.

– Base rate makes a poor monetary instrument during the war. The key monetary instrument today is administrative restrictions both on the foreign exchange market and on bank operation.

– The banking system made it through the shock at the beginning of the war, banks are already returning NBU’s refinancing and private deposits are flowing into the banking system. Even banks in the regions with active hostilities are working seamlessly.

– Liquidity is the key and only indicator for banks during the active war phase.

– Banks have enough money to actively lend to businesses.

– The NBU has considerably relaxed bank operations at the beginning of the war. The banks, in return, have to fairly report indicators with their real financial condition. Whatever losses resulting from the war, these should not be hidden without manipulating reports.

– Banks are businesses too and so, also have to make profits. Banks lend – and will lend – to those businesses that have chances of success or those supported by the State via its programmes.

– After the war, the NBU will return to its regular monetary policy of inflation targeting regime, flexible exchange rate, and will be cancelling administrative restrictions step by step.