NBU Council initiates annulment of deposit tax, increase of guaranteed deposit amount

The Council of the National Bank of Ukraine (NBU) has recommended Ukraine's Cabinet of Ministers and the NBU Board to initiate the annulment of individuals' deposit tax and the increase of the guaranteed deposit amount, according to the decision of the NBU Council made on July 4 and published on July 5.

"With the purpose of improving the policy of guaranteeing deposits and restoring confidence in the banking system, we recommend to consider updating the guaranteed amount of deposits for individuals from the Individuals' Deposits Guarantee Fund, taking into account the significant devaluation of the hryvnia in 2014-2016," the document said.

As reported, the guaranteed deposit amount today is UAH 200,000.

Deposit tax was introduced by the law on preventing the financial catastrophe and creating preconditions for economic growth in Ukraine passed in March 2014. The deposit tax is 18% now. Military tax of 1.5% is also collected from deposits.

The NBU Council said that the annulment of deposit tax should create conditions for cutting interest rates and returning money to the banking sector. The NBU board should analyze the influence of the tax and present it before October 1, 2017.

The council also recommended to the government jointly with banks to draw up a common solution for non-performing loans (NPL) and speed up the review of the strategy for reforming state-owned banks.