The NBU expanded the list of eligible collateral for ELA and simplified the procedural formalities, according to the central bank`s website.
The new Emergency liquidity assistance (ELA) facility was put in place in December 2016. ELA loans are intended to cover temporary liquidity shortages experienced by a bank, which is provided in the event of emergency liquidity needs when banks have exhausted other sources of liquidity support, in particular financing provided by shareholders and standard refinancing facilities provided by the NBU against the collateral of government securities and foreign currency.
Banks will be required to use ELA loans to meet their obligations to depositors and other creditors (except related parties).
In December 2016, the NBU identified eligible collateral for ELA loans:
– securities guaranteed by the government,
– liquid immovable property (except objects under construction ),
– property rights under loan agreements entered into by a bank and legal entities (except for banks and budget institutions) and natural persons, obligations under which are fully secured by mortgage except for objects under construction;
– property rights under loan agreements with individuals, except for sole proprietors (according to banks Loan Agreement Registry).
According to the latest changes, from now on, banks will be allowed to pledge as collateral against ELA loans property rights under loans to legal entities and sole proprietors that are not only backed by mortgage collateral but also other assets, i.e. mixed collateral.
Second, property rights under loans to individuals, liabilities backed by mortgage collateral shall be accepted by the NBU as collateral at their book value determined by the bank on a portfolio basis (in accordance with Loan Agreement Registry). Only property rights under mortgage loans to individuals issued in hryvnia will be accepted as collateral for ELA loans.
The NBU also specified that securities will be accepted as collateral for ELA at fair value.
The relevant amendments to this effect are provided for by NBU Board Resolution No.27, dated March 27, 2017, On Amendments to the Regulation on the Provision by the National Bank of Ukraine of Emergency Liquidity Assistance to Banks. The resolution shall come into effect on March 28, 2017.