National Bank of Ukraine (Ukrainian: Національний банк України) is the central bank of Ukraine. Its headquarters building, constructed between 1902 and 1934, is located at no. 9 Institutska St., in Kiev.

History

Prior to the collapse of the USSR, the National Bank of Ukraine was a branch of the Central Bank of the USSR. Officially, the National Bank of Ukraine acted as the Central Bank of Ukraine since early 1992. Like institutions of many newly independent nations, it faced dire financial straits during the 1990s, leading to a prolonged period of hyperinflation.

On March 20, 1991, the Verkhovna Rada of Ukraine adopted the resolution "On Banks and Banking Activity", which became Law on May 1. The resolution declared ownership by the Ukrainian SSR of the Ukrainian Republican Bank of the State Bank of the USSR, the Ukrainian Republican Bank (affiliate) of the State Commercial Industrial-Constructional Bank of the USSR, the Ukrainian Republican Bank of the Savings Bank of the USSR, and the Ukrainian Republican Bank of the ForeignEconomBank of the USSR as well as the Ukrainian Republican Department of Encashment of the State Bank of the USSR. The National Bank of Ukraine was resolved to be created on the basis of the Ukrainian Republican Bank of the State Bank of the USSR.

Former President of Ukraine Viktor Yushchenko was Governor of the National Bank of Ukraine from January 1993 to December 1999, before becoming Prime Minister.

Legal Status and Structure

Legal status, principles of organization and activities of the National Bank of Ukraine are determined by the Constitution of Ukraine and the Law of Ukraine "On the National Bank of Ukraine".

The National Bank of Ukraine is a legal entity with separated property, which is the object of the state property. Its authorized capital amounts to UAH 10 million and is the state-owned property which is in the full economic competence of the National Bank.

According to Article 99 of the Constitution of Ukraine, adopted in 1996, the main function of the country's central bank is to ensure stability of monetary unit-the Hryvnia. To carry out its main function, the National Bank shall foster the stability of the banking system and, within its competence, the price stability.

Functions

According to the Law of Ukraine "On the National Bank of Ukraine", the National Bank is the central bank of Ukraine, a specific central body of the state administration, its issuing center which pursue common state policy in money circulation, credit, strengthening of monetary unit; it coordinates functioning of the banking system in general; determines exchange rate of the monetary unit against foreign currencies.

The National Bank determines a kind of bank notes, their denomination, distinctive features and their protection system.

The National Bank of Ukraine ensures the accumulation and custody of the gold and currency reserves and the conduction of transactions with them and the banking metals.

The National Bank of Ukraine sets up the order of determining a discount rate and other interest rates; it gives permission for commercial banks' registration and licenses banking business; determines the standard of emergency funds for commercial banks and other financial and credit institutions.

The National Bank shall carry out the following functions:

• To determine and pursue the monetary policy in accordance with the General Principles of the Monetary Policy developed by the Council of the National Bank of Ukraine;
• To issue the national currency of Ukraine on a monopoly basis and to organize its circulation;
• To act as the last-instance creditor for banks and to organize the refinancing system;
• To establish the rules of conducting banking transactions, accounting and reporting, protection of the information, funds and property for the banks;
• To organize and to provide the methodological support to the system of the monetary, crediting and banking statistical information and the statistics of the balance of payments;
• To determine the system, procedure and modes of payments, including those between banks;
• To determine the areas of the development of modern electronic banking technologies, to establish, co-ordinate and control the creation of electronic means of payment, payment system, banking automation and the banking information protection facilities;
• To exercise the banking regulation and supervision;
• To keep a Register of banks, to license banking business and transactions, if provided for by the laws;
• To keep the official Register of identification numbers of issuers of payment cards of domestic payment systems;
• To exercise the inspection certification of auditors for conducting audit of banks, temporary administrators and liquidators of a bank;
• To compile, analyze and forecast the balance of payments;
• To represent Ukraine's interests in central banks of other states, international banks and other crediting institutions, where the cooperation takes place at the level of central banks;
• To exercise the currency regulation with the competence to be defined by a special law, to determine the procedure of effecting payments in the foreign currency, to organize and exercise the currency control over the commercial banks and other credit institutions which are in possession of a National Bank's license for the transactions with currency values;
• To ensure the accumulation and custody of the gold and currency reserves and the conduction of transactions with them and the banking metals;
• To analyze the status of the monetary, crediting, financial, pricing and currency relations;
• To organize the collection and transportation of bank notes, coins and other values; to grant licenses for collection and transportation of bank notes, coins and other values;
• To implement the national policy of the protection of state secrets within the system of the National Bank;
• To take part in the training of personnel for Ukraine s banking system;
• To define functioning characteristics of the banking system of Ukraine in case of martial law or a specific period, to exercise preparedness activity of the National Bank of Ukraine system;
• To exercise other functions in the monetary and crediting sphere within its competence defined by the law.

Ukrainian Payment System

The general principles of functioning of payment systems in Ukraine shall be regulated by the laws of Ukraine “On the National Bank of Ukraine” , “On Banks and Banking”, “On Payment Systems and Funds Transfer in Ukraine”, “On the Postal Communication” and other legislative acts of the National Bank of Ukraine.

In accordance with Article 7 Of the Law of Ukraine “On the National Bank of Ukraine”, the National Bank of Ukraine shall create, coordinate and control the creation of payment systems.

Domestic bank and non-bank payment systems may be created in Ukraine.

Domestic bank payment systems include inter bank settlement systems, mass payment systems and interbank payment systems.

The National Bank of Ukraine has created and ensures functioning of the interbank settlement system (the System of Electronic Payments) and retail payment system (the National System of Mass Electronic Payments).

The procedure for operation of the payment system is determined by the rules established by the payment institution of the corresponding payment system. If a payment institution is a resident, the rules of domestic payment system and international payment system have to be agreed by the payment institution of the payment system and the National Bank of Ukraine.

The mandatory function of the payment system is to transfer funds. The interbank funds transfer is carried out within three business days.

The interbank funds transfer is carried out within a time period established by internal bank enactments, but it cannot exceed two business days.

The funds transfer involves the use of payments instruments. The payment instruments include transfer documents (settlement documents, cash transfer documents, interbank settlement documents, clearing claims and others) as well as other means of payment (payment cards, mobile payment instruments, etc.)

Processing and transfer of electronic and paper transfer documents, documents required for transactions involving special means of payment and withdrawal documents can be carried out through national (domestic) and international payment systems operating in Ukraine.

The international financial institutions, in particular, the Bank for International Settlements and the European Central Bank acknowledge the leading role played by the payment systems and settlement systems (hereinafter the payment systems) in supporting financial stability of the country. In view of the above, and in order to facilitate the uninterrupted and efficient operation of payment systems, the central banks have commenced exercising supervision (oversight) over payment systems.

With a view to determining the policy fundamentals with regard to exercising supervision (oversight) over payment systems operating in Ukraine, the National Bank of Ukraine approved the Framework for introduction of supervision (oversight) over payment systems in Ukraine (Resolution of the Board of the National Bank of Ukraine No 426 of 15 September 2010).

The proper exercise of supervision (oversight) function by the National Bank of Ukraine requires the development of domestic legislation. In order to develop a legal framework for supervision (oversight) over payment systems and entrust them with the relevant powers, the National Bank of Ukraine has prepared proposals with regard to introducing amendments to certain laws of Ukraine with taking into account recommendations and standards developed by the international financial organizations.

The National System of Mass Electronic Payments is a domestic banking multi-issuing mass electronic payment system, in which all payments for goods and services, receiving cash and other transactions are carried out by means of smart cards, incorporating technology developed by the National Bank of Ukraine.

The NSMEP is a modern, high-tech and highly protected system. The key element of the system is a smart card. The NSMEP payment cards have a high level of protection against unauthorized access. The high level of confidence in this system is based upon the guaranteed software protection of chip-based payment cards and acknowledged security of transactions, which is confirmed by the increasing volume of transactions involving payment cards and their growing issuance.

The NSMEP introduction enabled the citizens of Ukraine to pay for goods and services on cashless basis and withdraw cash with the help of special means of payment (payment cards, mobile payment instruments, etc.), as well as to keep and accumulate their savings on current accounts with banks.

Bank supervision

The National Bank of Ukraine exercises regulation and banking supervision in accordance with the provisions of the Constitution of Ukraine, the Law of Ukraine “On Banks and Banking”, the Law of Ukraine “On the National Bank of Ukraine” and other legislative acts of Ukraine and regulations of the National Bank of Ukraine.

The purpose of banking supervision is stability of the banking system and protection of interests of depositors and creditors as to the safekeeping of client’s funds on banking accounts.

Supervisory activity of the National Bank of Ukraine covers all banks, their subdivisions, affiliated and related parties of the banks on the territory of Ukraine and abroad, offices of foreign banks in Ukraine, as well as other legal entities and individuals in their compliance with the requirements of the Law of Ukraine “On Banks and Banking” as to performing banking activity.

In order to exercise its functions, the National Bank is entitled to obtain free of charge from the banks, bank unions (associations) and legal entities that have been granted a license by the National Bank to perform certain banking transactions, as well as from the persons whose activities are supervised by the National Bank pursuant to the Law of Ukraine “On Banks and Banking”, the information of their activities and explanations with regard to the obtained information and effected transactions.

The obtained information shall not be disclosed, except in the cases prescribed by the laws of Ukraine.

In the course of banking supervision, the National Bank of Ukraine has the right to require that the banks and managers thereof eliminate banking legislation violations, fulfill NBU regulations in order to avoid or to overcome undesirable consequences, which could jeopardize safety of the funds, entrusted to these banks or inflict damage on a proper banking activity.

The National Bank of Ukraine carries out the banking supervision in the form of on-site inspections and off-site supervision.

Useful links

Currency of Ukraine:

Ukrainian grivna

List of Central Banks:

Central Banks

Official website of National Bank of Ukraine:

www.bank.gov.ua

Ministry of finance of Ukraine:

www.minfin.gov.ua