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the central bank said on November 12. UnionPay is the world's largest international payment system in terms of the issued cards, the NBU reports. In the first stage, the UnionPay payment system will provide acquiring services in Ukraine, issuing cash and paying for goods and services using UnionPay payment cards. In the future, it plans to issue UnionPay payment cards via Ukrainian partner banks. The UnionPay payment system becomes the fourth international card payment system operating in Ukraine. As reported, in July 2018 at meeting of the NBU Governor Yakiv Smolii and First Deputy NBU Governor Kateryna Rozhkova with China UnionPay President Shi Wenchao the regulatory rules for entering the Ukrainian market by the UnionPay International were discussed, as well as aspects of possible cooperation of the Chinese payment system with the Prostir national payment system. UnionPay International was established in 2002 and it is a subsidiary of China UnionPay.
Ukraine’s state-owned retail bank Oschadbank is attempting to clean up its balance sheet and says it will restructure UAH10bn ($358mn) of bad debt on its books, the bank announced on November 15. The bank has already restructured some UAH14bn of bad loans that have been on the books since before 2014, but now the bank will restructure an addition UAH10bn, according to Board Chairman Andriy Pyshny. "In October 2019, the law on financial restructuring will be ineffective. All cases should be closed in 2019," he said, as cited by Interfax. Pyshny said that the law on financial restructuring, unfortunately, is the only instrument for solving the acute problem of old toxic assets. He complained that, despite appeals to international financial institutions, Ukraine has not set up any mechanism, such as a “bad bank,” to deal with the bad debts on the books of state-owned banks. The bank invested a lot of time and money to boost its loan portfolio in 2017-2018, however, poor market conditions, high inflation and two rate hikes by the National Bank of Ukraine (NBU) combined to stymie the initiative. The one note of success has been for the bank to increase its share of retail deposits from 7% to 22% over the last four years. It also increased its share of the mortgage market to 30 and the share of autoloans to 15%. The bank has retrained half of its 32,000 staff and opened 600 modern format branches as part of its drive to win new customers. Oschadbank was the first state-owned company to filed a lawsuit against Russia in an international court in an attempt to get compensation for assets it lost thanks to the annexation of the peninsula.
8.2 Central Bank policy rate
Members of the monetary policy committee at the National Bank of Ukraine (NBU) were split over the question of whether to hike interest rates at the last monetary policy committee meeting in October. In the end the central bank took the unpopular decisions to keep rates on hold at 18%. The central bank has hiked rates twice this year, which remain uncomfortably high but have been effective in containing inflation. The minutes of the meeting disclosed more details of the October decision to keep its key policy rate unchanged and were published on November 5. They reveal that five committee members called for keeping the key rate unchanged at 18.0%, splitting from the other five present members who called for hiking it by 0.5pp to 18.5%. The doves argued that the current rate creates monetary conditions that are tight enough for controlling inflation and the influence of previous rate hikes is not exhausted. In addition, they cited Ukraine's recent agreement with the IMF on a $3.9bn Stand-By Arrangement (SBA), which is likely to positively
54 UKRAINE Country Report December 2018 www.intellinews.com