IMF welcomes end to govt right to ask NBU to allow currency transfers by individual companies
MOSCOW. March 22 (Interfax) - The International Monetary Fund welcomes the Verkhovna Rada's adoption on March 21 of a law enhancing the work of the Deposit Guarantee Fund for Individuals and which stripped the government of the right to request that the National Bank grant separate permits for a legal entities to conduct a cross-border currency transfers in transgression of the NBU's own restrictions.
The IMF believes it is important to eliminate all ambiguity about which institutions control this, Ukrainian media quoted the head of the IMF mission in Kiev, Gavin Gray, as saying at a briefing in the early hours of Friday when asked about the 15 requests filed by the government to allow payments by a number of companies to external creditors totaling over $1.8 billion.
Gray said that under the current cooperation program with the IMF, the National Bank had come up with a strategy approved in June last year for gradual currency liberalization, based on a correct approach to easing existing restrictions so that this benefits all stakeholders equitably.
Gray said the IMF believed the best way to proceed was to follow the strategy.
Asked what the Fund thought about Ukrposhta's possible acquisition of First Investment Bank, Gray said Ukraine's obligations under the program were not to increase the state's presence in the banking system, since that influence was already extremely strong, significantly exceeding 50%.
Regarding the specific question asked, he said this was of course a problem for the NBU as regulator and supervisory body. Any decisions to issue a banking license will have to follow existing rules in terms of the integrity of any institution that has declared its ability to have sufficient capital, and comply with existing regulatory and supervisory regulations, he said.
The Ukrainian government adopted resolutions on February 6 and 13 to approve requests to the National Bank that VF Ukraine, DTEK, Metinvest, Interpipe and Kernel be allowed to make payments to Eurobond holders and other foreign creditors from Ukraine. Supporting documents said such decisions would help maintain investor confidence, save foreign currency for the companies, many of which are major exporters, and ensure their more efficient and stable operation in the future.
Gray said that back then he had written to the Ukrainian authorities, expressing his doubt that such an individual approach is consistent with the Strategy for easing foreign exchange restrictions, approved by the National Bank last summer in fulfillment of commitments under the extended financing program or EFF. The Fund is also concerned about the fairly significant amount of potential payments and the possible impact of such decisions on Ukraine's upcoming negotiations on the restructuring of sovereign Eurobonds with commercial creditors.
The NBU has so far avoided a direct answer to the question about its readiness to grant the 15 government requests. The National Bank has indicated that it has taken note of them and will consider each application individually, but at the same time advocates a comprehensive approach.
"The NBU will also pay attention to the performance of the relevant business groups both before and during the crisis. This is essential to understand whether a separate NBU authorization is indeed critically needed for each individual company," the NBU said in response to questions from Ukrainian media.