On July 20, 2018, the regular meeting of the Council for Financial Stability took place which was attended by Head of the National Bank of Ukraine Yakov Smoliy, acting Minister of Finance Oksana Markarova, Head of the National Securities and Stock Market Commission Tymur Khromaev, Head of the National Commission for the State Regulation of the Markets for Financial Services Ihor Pashko, Managing Director of the State Deposit Fund Kostiantyn Vorushylin, First Deputy Head of the National Bank Kateryna Rozhkova, Deputy Minister of Finance Yuri Geletiy and other representatives of the mentioned institutions.
Delay in the resumption of cooperation with the IMF – key hazard for financial stability
In the beginning, the Council members – in line with the established course of the meeting – discussed risks for the stability of the financial system. The Council members emphasized that the implementation of the structural reforms agreed in the program of cooperation with the IMF is vital for macro-financial stability and access to funding from the IMF and other international partners. This is especially important for ensuring further demand for Ukrainian sovereign bonds in the context of the global trend for the departure of investors from emerging markets as well as in regard to the significant foreign public debt payments to be made within the next two years.
Considering the overall current macro-economic situation, the Council members mentioned the acceleration of economic growth observed since the beginning of the year which comes along with active private consumption and investment-driven demand as well as a stable situation on the currency market and the slowing pace of inflation.
Coordination of fiscal and monetary policy
The meeting participants paid significant attention to the coordination of fiscal and monetary policies. The National Bank representatives informed that they are keen to avoid any form of fiscal domination including any direct or indirect support for budget spending. The Ministry of Finance stressed the necessity to intensify its cooperation with the National Bank in regard to the coordination of initiatives in the monetary and fiscal policy. The Council members agreed that the reforms must be continued to ensure price and financial stability.
Legislative regulation of transactions involving crypto currencies
During the meeting, the Head of the National Securities and Stock Market Commission presented a concept for the state regulations of transactions with crypto currencies in Ukraine.
This concept outlines the legal status of crypto currencies and tokens as a kind of financial instruments. The National Securities and Stock Market Commission shall be designated as the body regulating the crypto currency market. The concept also determines the role and functions of other state bodies (National Bank, Ministry of Finance (SFS), State Financial Monitoring Service) in the regulation of such financial instruments as well as clarifies issues like licensing for entities involved in transactions, disclosure of information etc.
The Council for Financial Stability approved the proposed concept in general. Tymur Khromaev, Head of the Commission, said: “this is an important initial step which demonstrates that the state is ready to develop legal basis ensuring transparency and high quality of relations between investors and participants of the cryptocurrency market.”
Settlement of bad loans and the debt burden of the State Deposit Fund
The Council for Financial Stability is also focused on the issue of bad loans (NPLs) at state-owned banks.
To ensure the practical implementation of measures aimed to settle the issue of NPLs in the public banking sector, the Council supported the proposal of the Ministry of Finance to establish a dedicated independent committee within the Council entitled to settle the NPLs. Also, the Council for Financial Stability examined and approved the action plan submitted by the State Deposit Fund which is aimed to settle the debt burden of the Fund and to prevent its possible insolvency in the future.
The Council for Financial Stability was founded in March 2015 according to the Decree of the President of Ukraine. The mandatory members of the Council are the Head of the National Bank of Ukraine, Minister of Finance (both co-chairing the Council), the Head of the National Securities and Stock Market Commission, the Head of the National Commission for the State Regulation of the Markets for Financial Services, the Managing Director of the State Deposit Fund, the Deputy Head of the National Bank and the Deputy Minister of Finance of Ukraine.
The Council for Financial Stability is a platform for the professional discussion of system-relevant risks affecting the financial stability of the country. The next regular meeting of the Council is scheduled for the October of this year.