Ukrainian banks are preparing to launch its index of deposit rates

The National Bank and commercial banks were united in striving for the next few months to run code deposit rates, designed to become an objective indicator of the value of money in the market of the country for periods of 3, 6, 9, 12 months and the basis for the use of floating rates. The index will be calculated automatically in the Thomson Reuters based on nominal interest rates on deposits of classic top 20 Ukrainian banks. According to the representative of the NBU, transparent accounting system in real bank rate will provide objective indicators. "The market needs a reliable indicator of the price of money for 3 months or more, because the existing indices interbank rates KievPrime and Kieibor adequately reflect the market only in the horizon of up to 1 month" - said the director of the department management of foreign exchange reserves and open market operations NBU Alexander Dubihvost. It is planned to calculate the index of the rates of deposits at three, six, nine and 12 months in UAH, U.S. dollars and euros, the banks - participants will pay into the system daily. Daily at the time the system will publish the index, calculated as the arithmetic mean of the quotations from Truncation of the two highest and the lowest. "We recommend that banks use this code where they deem necessary, including - in the long-term lending," - added Dubihvost. According to representatives of banks, lending for more than three to five years, is still underdeveloped in Ukraine due to lack of long-term resources in the national currency, the associated risks and high interest rates that reflect these risks. "Issuance of long-term loans - such as mortgages - fixed rate carries a significant risk to the banks, as the timing of deposits attracted much shorter and, in the event of a crisis of liquidity and rising interest rates, they will lose" - the head of Treasury's Universal Bank Sergei Ponomarenko. In addition, Ponomarenko said that a floating rate based on a universally accepted index will reduce the risks, which benefits both banks and customers. "In the absence in this case, the interest rate risk banks are willing to provide loans with a much smaller margin. Moreover, in case of a general decrease in rates (which is observed in Ukraine in recent years), borrowers will benefit from cheaper credit and not be tied to high fixed rate "- added Ponomarenko. Of the same opinion, and deputy chairman of Pravex Bank Taras Kirichenko. "Banks will be able to tie pricing of banking products - credit and deposit - to this index, which will extend the period of borrowing, reduce the gap between short-term borrowings and long-term loans and reduce the price to end-borrowers," - said Kirichenko, and added that for the application of the index in banking is not only objectivity but also support the regulator. "It is important that National Bank has approved the methodology and recommended that banks use an index, where necessary," - said Kirichenko. Source: Prostobank Consulting