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This note was created to promote awareness and discussion on this topic and cannot consider all potential elements, especially considering the fast-moving nature of developments in Ukraine. The flash report was created at 6 pm Ukraine time on 26/02/2022 and reflects the best understanding at the current time.
Based on conversations with connections in the UK banking industry that I have had today, the general opinion is that the Ukrainian banking system seems to be operating well so far and that they have not seen alerts in their systems, and card settlements seem to be looking fine currently. Ukrainian retail bank credit was reported to be ok yesterday. The working logic is that the Ukrainian bank systems are resilient, and backup systems will be based abroad by now. It was noted that the banks had had significant time to work on this and that they have a very strong tech sector in Ukraine, with, for example, major tech companies such as GitLab, Readdle, and Grammarly and being based out of Ukraine with the country having an estimated 200,000 software developers, according to a 2021 report from the IT Ukraine Association. Additionally, The Ukrainian Association for Fintech and Innovation Companies (UAFIC), which aims to foster the development of the domestic financial technology ecosystem, estimated that there were over 100 fintech projects in Ukraine as of 2020, with approximately 4 thousand persons employed in the fintech industry, i.e. about 2.4% of the total Ukrainian IT workforce.
The Ukrainian Central Bank, the National Bank of Ukraine (NBU), has approved Rules for Banks to Operate under Martial Law Introduced in Ukraine. Under these rules, the NBU provides unlimited cash support to banks and grants unlimited unsecured refinancing loans to banks, with up to one-year maturity and an option to extend the loan by another year so that banks can maintain their liquidity. Under the new rules, the NBU has banned foreign currency purchases on the interbank market and fixed the official hryvnia exchange rate on February 24. On February 26, the National Bank of Poland provided the NBU with up to 4 billion PLN in a currency swap, and it is reported that other central banks should follow soon. As such, Ukraine, as long as western support continues, should be able to maintain its current currency peg and not see a wider currency or banking crisis and so the NBU should be able to, at least in the short term, continue to provide necessary liquidity and financing to the banking sector.
The NBU is also working with national banks to the extent possible to replenish ATMs with cash, and the NBU, in its turn, is supplying banks with cash and liquidity. To limit short term liquidity issues, the NBU has imposed a temporary limit of UAH 100,000 per day (3,335 USD or 2,959 euro) for cash withdrawals.
On February 23, a day before Russia’s invasion, the National Bank of Ukraine (NBU) said that banks or exchange offices had adequate cash holdings to meet the public’s demand. Foreign cash deliveries were also proceeding as planned. However, in the last 48hrs, there have been numerous reports in media of ATMs having run out of liquidity, so it is unclear currently how successful measures are to ensure the ATMs system continues to operate.
The NBU in a recent statement, emphasized that cashless is the safest and most reliable way to pay for goods and services in the current conditions. While this statement is not agreed with by all financial actors, it can be noted that no restrictions have been imposed on cashless settlements and the NBU’s System of Electronic Payments (SEP) is reported to be operating without interruption. Ukrainian banks are still connected to SEP and are making payments to customers on a regular basis and without any breaks. Currently, there are no indications that debit and credit cards issued in Ukraine (normally Visa, Mastercard or Maestro) would have issues being used outside of the country, enabling refugees to access their savings still directly.
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