National Bank criticizes Ukrainian state banks for investing in G7 securities instead of Ukrainian sovereign bonds

MOSCOW. Oct 27 (Interfax) - Ukrainian state banks prefer G7 securities over Ukrainian sovereign bonds, which creates reputational risks, Ukrainian media said, citing a letter by the National Bank of Ukraine dated October 25 and published on a social network on Thursday.

"This may indicate a lack of effective communication between state banks and their shareholder. In particular, when making decisions on the placement of available foreign exchange liquidity, state banks need to coordinate investment decisions, including available instruments issued by the Ukrainian Finance Ministry, with their shareholders," the letter said.

State banks should remember that available liquidity stems from public funds, including the support from international partners, among other sources, it said.

If any obstacles to investing available foreign exchange liquidity in sovereign bonds emerge, state banks need to submit appropriate proposals to the Finance Ministry, the regulator said.

Also, when making decisions to give preference to state banks' investment in securities of other countries instead of Ukrainian securities during a crisis, attention should be paid to the reputational risk, both for banks and for the country, which may have an impact on support from international partners, the letter said.