National Bank of Ukraine
National Bank of Ukraine (Національний банк України or НБУ; Natsionalnyi bank Ukrainy or NBU). The central bank of Ukraine, its major function according to the Constitution of Ukraine (art 99) being to ensure stability of the national currency, the hryvnia. Other functions assigned to it by law include responsibility for monetary policy, emission of currency, overseeing the banking system, and supervising credit policy as well as the payments system. It is meant to be independent. The head of NBU is appointed for a term of seven years (renewable once); he or she is ex officio a member of the NBU Council, the body that sets monetary and credit policy. The first NBU head appointed in 1992 was Vadym Hetman, who was succeeded by Viktor Yushchenko (head 1997–2001).
The current banking era in Ukraine began on 20 March 1991, when the Supreme Soviet of the Ukrainian SSR passed the “law “On Banks and Banking.” The Ukrainian SSR’s branch of the USSR State Bank became the NBU and, at the same time, private commercial banks were allowed to operate. Because of extremely low barriers to entry, the number of private banks increased from 76 in 1991, to 230 in 1995. It was relatively simple for wealthy businessmen to start up banks which they could then use to expand their businesses taking advantage of the direct access to cheap or even free credit which ownership offered. Ensuing bankruptcies, however, and stricter capital requirements enforced by NBU brought the number of commercial banks in Ukraine to 186 by the end of 2005.
Due to absence of hard budget constraints on the part of government and NBU’s loose money policy in its loans to both business firms and the state, by 1993 Ukraine was experiencing hyperinflation (nearly 10,255 per cent). This situation undermined public confidence in the national currency and led to an extraordinary level of dollarization in the economy as well as to the growth of a shadow economy. In September 1996 NBU introduced the new Ukrainian currency, the hryvnia, with an official exchange rate of 1.76 per USD, replacing the karbovanets and kupon. This had symbolic as well as practical significance in bolstering national self-confidence and marking the country’s final departure from the Russian rouble zone. Some of the first new banknotes printed in Canada in 1992 were kept locked away in secret until emission.
Thereafter the main challenge for NBU was maintaining the value of the hryvnia, which could be done through the exchange rate in one of three ways: fixed, floating, or transitional. Given the weakness of Ukraine’s economy, in order to maintain stability, NBU (1996 to 2014) relied on an exchange rate anchor. While providing an illusion of stability such a policy could not mask the sharp drop in the value of the hryvnia in 2009 (by 2008 it was already at 4.85 per USD) and with that real impoverishment of the Ukrainian population. The value of the hryvnia and of NBU’s policy would have been better measured directly against the US dollar. In fact, the exchange rate rose from 8 to 27.2 between 2010 and 2016 and the value of the hryvnia correspondingly dropped.
In 2015, encouraged by the International Monetary Fund (IMF), NBU turned its attention to fighting inflation and started supervising commercial banks. Foreign direct investment in Ukraine’s banking sector spiked in 2007–9 and helped improve corporate governance, but this effect later ebbed promising further volatility. The battle against inflation was successful but not long-lasting. Starting at 43.3 percent in 2015, the consumer price index fell to 4.1 in 2019, but increased sharply to 26.6 per cent in 2022.
The turmoil launched by the 2014 Euromaidan Revolution—domestic political instability, economic recession, loss of the Crimea, war in the Donbas, and the Russian Federation’s interference—made NBU’s task difficult thereafter. IMF assistance brought some relief, but also imposed constraints. Not fully recovered from the 2008–9 crisis, the banking sector continued to be fragile. Under IMF direction, NBU imposed stress tests on the largest banks, of which only a minority passed. In the course of this ‘clean-up,’ by the end of 2014, 35 banks were judged insolvent; of this number 17 were liquidated. Other indicators remained troublesome in the ensuing years: bank deposits in decline, non-performing loans on the rise, continuing depreciation of the hryvnia, and a drop in international reserves. NBU attempted to support the banking sector by providing refinancing funds. More banks were declared insolvent or liquidated altogether. Losses exceeded earnings in Ukrainian banks in the first quarter of 2015. By June 2015, only 128 banks were operating in Ukraine, one-quarter having been eliminated in a year and a half.
The first signs of economic stabilization appeared in October 2015. Bank deposits began to rise in 2016, followed by loans. The value of the hryvnia, however, plummeted due to the adoption of a flexible exchange rate, starting in September 2014 at a rate to 13 to USD, it reached 21.5 a year later, showed some signs of leveling off in 2017, but ended the year 2018 at 27.7. By March 2020, it was still 27.75.
Under attack politically for her reforms and for cooperating with IMF’s austerity prescriptions, Valeriia Gontareva, the first woman NBU head, appointed by President Petro Poroshenko, resigned in April 2017. This followed the nationalization of Privatbank, the largest privately-owned bank in Ukraine, in December 2016. One of its co-owners, the oligarch Ihor Kolomoisky, had defrauded the bank of 5.5 billion USD disguised as loans to fictitious entities. It was judged by the Ukrainian government as being ‘too big to fail’ which necessitated a corresponding bailout at taxpayers’ expense. Kolomoisky subsequently attempted to repossess the bank, but failed—in February 2025, the Supreme Court of Ukraine in a final ruling dismissed Kolomoisky’s appeal in favor of the state. The Privatbank scandal illustrated the banking sector’s corruption and the immense challenge facing NBU in restoring its fiscal health. This was the tip of the iceberg. Gontareva was replaced by Kyrylo Shevchenko, yet another former banker suspected of having used the bank of which he was chairman as a personal piggy bank. Gontareva continued to suffer abuse even after her resignation which she attributed to political pressure. Under Shevchenko’s leadership bank deposits saw growth as did loans, the result of growth in wages as well as improved savings account interest rates. By the end of 2018, NBU—which began its existence in 1991 with zero foreign reserves—had managed to increase international reserves to 20.8 billion USD, its highest level since 2013. The tide briefly turned in 2019 before resuming its positive trend in 2020. By 2021 the amount of international reserves was up at 28 billion. In December 2019 NBU reduced its key policy rate (i.e., discount or central bank interest rate) to 13.5 percent, followed by a further cut to 6.0 percent in 2020. All of these were positive developments.
With the Russian Federation’s full-scale invasion of Ukraine on 24 February 2022, a tremendous responsibility fell upon NBU: to ensure in wartime conditions stability and continuity of the monetary and banking system, the functioning of state finances, and to meet the defence needs of Ukraine. Accordingly, NBU immediately issued a resolution imposing restrictions on individual cash withdrawals, introducing prohibitions and limitations on banking operations, and terminating transactions with the Russian Federation and Belarus.
On 7 October 2022 Andrii Pyshny was appointed NBU head following the resignation of Shevchenko citing ill health but under investigation for corruption. A lawyer who began his banking career in 2000, Pyshny had also been elected in 2012 to the Supreme Council of Ukraine and served in 2007–9 as deputy secretary of the National Security and Defense Council of Ukraine (RNBOU). His plan of action, called Power Banking, was designed to ensure operation of the banking system throughout the country in the event of the energy infrastructure’s incapacity. Given blackouts and cyberattacks were a real threat, emergency generators and migration of data to the electronic cloud would be solutions for Ukraine. In December 2024 NBU reported that a Russian cyberattack on government registries in Ukraine had reduced banks’ ability to open accounts and to issue loans. A month later NBU building was damaged externally when attacked by a Russian drone.
As of 2025 a positive feature of the banking situation and of NBU’s record of accomplishment was that Ukrainian banks themselves were profitable even in wartime—in 2024 they earned 2.5 billion USD. Only nine of 61 operating banks were unprofitable. Other indicators were less positive: inflation in 2024 was 12 percent; the counterfeiting business was rapidly growing (in 2024 NBU detected 5.1 counterfeit hryvni banknotes per one million real ones, as compared to 2.1 in 2023 and 2.2 in 2022); in March 2025 it raised the discount rate to 15.5 percent, a new high. A survey in June 2025 showed that 68 percent of Ukrainians responding said they had no savings. In spite of that, people were donating to funds for support of the Armed Forces of Ukraine—one such fund established on 24 February 2022 by NBU, another by Monobank, a private bank which by June 2025 had collected the equivalent of 23.8 million USD in donations.
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Bohdan Harasymiw
[This article was written in 2025.]