Hryvnia deposits declined in January: NBU expects changes in banks’ interest rate policy
17 February 12:56
Bank deposits in national currency in January decreased by 3% (minus UAH 56.5 billion) to UAH 1826.9 billion. This was reported by Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, citing the NBU’s operational data, Komersant ukrainskyi reports.
According to him, business deposits decreased by 5.2% (minus UAH 56.7 billion), while household deposits increased slightly (plus UAH 0.2 billion).
Deposits in foreign currency increased by 1.1% (plus USD 0.24 billion), both by businesses and households.
As Danylo Hetmantsev explains, the outflow of hryvnia deposits in January is a seasonal phenomenon and this trend has been observed in ten of the last eleven years.
“Although, of course, each year has its own additional specifics, as was the case, for example, in early 2015 or 2022, this is a purely seasonal phenomenon. It is associated with peak payments in December, at the end of the year. Since both the budget and the private sector are trying to close settlements as quickly as possible, deposit balances are growing at a faster pace at the end of the year. In particular, in December 2023 alone, they grew by UAH 140.4 billion in hryvnia deposits. This is especially evident in the settlements made in the last days of the year. With the beginning of the new year, some of these funds are withdrawn from accounts to meet priority needs,” the MP explained.
According to him, it is very good that this year (unlike last year) this seasonal story is not being used to make a hype about the loss of confidence in the banking system under false pretenses.
According to Danylo Hetmantsev, despite the third year of the full-scale war, the banking system remains highly liquid, profitable and properly capitalized.
NBU expects banks to raise interest rates
The NBU expects that a 0.5 percentage point increase in the key policy rate in December and a 1 percentage point increase in January, along with differentiated reserve requirements, will encourage banks to raise interest rates on hryvnia deposits to provide better protection of hryvnia savings from inflation and support demand for these instruments.
The NBU reminds that a stable inflow of funds is a resource for banks to further increase investment and lending, which will contribute to further economic recovery and strengthen Ukraine’s defense capabilities.
In an interview with Forbes Ukraine, NBU Governor Andriy Pyshnyi said, “The National Bank expects banks to review their interest rate policy in the near future and offer adequate rates, taking into account inflation expectations.”
“The December decision to raise the key policy rate by 0.5 percentage points has already stopped the decline in deposit rates in banks, and some banks have slightly increased their rates,” Pyshny said.
Do all banks react this way?
Large banks have begun to gradually increase the yield on hryvnia deposits. As noted in mid-February by the “Minfin” publication, out of 28 participants in the deposit review, 8 financial institutions have done so over the past 2 weeks. However, some financial institutions continued to reduce deposit rates during this period.
The publication also reports that more than 70% of depositors keep their money on demand deposits, while only about 30% of Ukrainians’ funds are on term deposits. Of these 30%, deposits for more than a year account for just over 1%. Deposits for 3 months are the most popular – almost 17%.
