Mandatory Reserve Policy as a Tool for Stabilizing the Monetary and Credit Market of Ukraine

The article examines the impact of reserve requirement policy on the volume of operations in the monetary and credit market. It is noted that in Ukraine, the regulation of reserve requirements has generally been aimed at reducing the risks faced by banking institutions and limiting speculative currency transactions. Frequent changes in the reserve ratio negatively affect banking activities, as they hinder long-term strategic planning for commercial banks. Depending on the state of the monetary and credit markets and forecasts of their further development, the National Bank of Ukraine (NBU) adopts specific decisions regarding reserve requirement norms and the procedure for forming and storing mandatory reserves. To increase the effectiveness of monetary regulation and avoid financing the budget deficit through monetary emission, as of December 13, 2022, banks were permitted to cover part of their mandatory reserves using benchmark domestic government bonds (benchmark OVDP). The paper analyses the redistribution of government bond ownership shares before and after the introduction of these measures. The possibility of counting domestic government bonds of Ukraine toward reserve coverage increases commercial banks' interest in these instruments. It promotes the redistribution of banking resources, growing funding for public expenditures, while simultaneously reducing lending to businesses and households. The study analyses the impact of increased reserve requirements on the resource base of commercial banks in Ukraine and their ability to provide loans to economic entities. It presents the dynamics of key indicators, including the average interest rate on loans and deposits, the weighted average yield of government bonds, the inflation rate, and the exchange rate of the national currency. Based on these indicators, the article evaluates the effectiveness of the mandatory reserve policy and offers recommendations for its improvement. It also discusses measures for the gradual reduction of the reserve ratio and the increase of free liquid assets held by commercial banks, intending to expand their lending capacity during Ukraine's post-crisis recovery. To attract investment into the country, a favourable investment climate is necessary, which cannot be achieved without a balanced monetary and fiscal policy by the state.