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. Last Updated: 07/27/2016

After Outburst, Ukraine Bank May 'Soften' Currency Stance

KIEV -- Ukraine's central bank chiefs Monday were re-examining regulations restricting currency trading by banks from former Soviet republics after a stormy reaction from Russian authorities and complaints by commercial banks.


"At this moment the bank leadership is reviewing this new rule. I am not sure it will be changed completely, but it might be softened," said chief spokesman Dmytro Rikberg. He said the meeting's outcome could be announced late Monday or Tuesday.


A Central Bank statement said Friday non-resident banks from former Soviet republics, except Estonia, could trade on the inter-bank market only if they held a contract for goods and services with payment in karbovanets, Ukraine's interim currency.


In Moscow, the central bank responded angrily to the announcement, advising Russian firms against settling bills for Ukrainian goods in karbovanets, saying they should use Russian rubles or a convertible currency instead.


It said the measures violated a 1992 agreement between the two central banks and made it impossible for Russian banks to conduct operations in karbovanets.


The Moscow Interbank Currency Exchange indefinitely suspended trading in karbovanets.


Ukrainian commercial banks predicted the measure would considerably reduce the size of Ukraine's embryonic currency markets.


"This has lowered interest of non-resident banks in the market and destabilized the market," Ihor Yurchenko of Aval Bank said.


One banker said the move was linked to central bank attempts to prevent speculation. "Some did not properly inform the authorities about currency conversions," he said.