Ukraine's central bank on Monday limited bank lending and restricted withdrawals from some kinds of retail accounts as the government tried to stem growing doubts among citizens about the country's troubled banking sector.
The National Bank said it has has prohibited early withdrawals of bank deposits with maturity dates and has imposed limits on lending money, after worried depositors withdrew more than US$1.3 billion from their accounts since the beginning of the month.
It also imposed limits on trading of foreign currency, with no more than a 5-percent difference between buying and selling prices allowed, in order to shore up the battered hryvna, which has fallen nearly 20 percent in recent weeks.
"The psychological factor is what is 90 percent responsible for creating panic," deputy chairman of the National Bank Anatoliy Shapovalov was quoted saying by the Unian news agency. "This decision was made so that people calm down and banks work in a normal manner."
Analysts welcomed the move, but also said it demonstrated the banking sector was in bad shape.
"This measure is aimed at stopping panic among depositors," said Yevehn Hrebenyuk, a stock market analyst with Troika Dialogue Ukraine.
The Ukrainian economy, already shaken by the world financial crisis, was battered further last week when President Viktor Yushchenko dissolved parliament and called for an early vote for Dec. 7 in his battle for power with Prime Minister Yulia Tymoshenko.
The vote would be the third parliamentary election in as many years, and experts say it will only exacerbate the country's economic and political problems.
Stocks have plummeted some 30 percent over the past month as investors fled emerging markets amid the world financial crisis. Many steel mills _ the backbone of the country's fragile economy _ have had to halt or slow production because of a lack of global demand.
The National Bank has had to come to the rescue of two major banks to avert a crisis. That prompted many Ukrainians to withdraw as much as 6.2 billion hryvna ($1.3 billion) from their accounts, or 2.7 percent of all bank deposits that have a maturity date, according to Unian.
Hrebenyuk also declined to discuss the figure provided by Kommersant, saying no such numbers have been made public, but he said the banking sector was still under control.
"There is no mass runs on banks in Ukraine," Hrebenyuk said. "I think it will contract in some way, but I don't think there will be a collapse."
Deputy National Bank Volodymyr Krotyuk sought to calm depositors Monday, saying Prominvest, which has been taken over by the central bank, had enough assets to pay all retail clients. He also said the government was looking to sell a majority stake in Prominvest to a strategic investor _ a measure it hopes will salvage the bank.
Ukraine insures retail accounts up to 50,000 hryvna (US$10,200).
The Renaissance Capital investment bank said in a note to investors that the restrictions will give Ukrainian banks more time to mange liquidity positions in the short-run. But it also warned that such measures could undermine growth in the long run.
Hrebenyuk cautioned that the fact that the National Bank's measure had no timeframe showed the crisis may last a while.
"It means that at the National Bank they themselves don't know when this will end," he said.
Yushchenko met with key government leaders Monday and again ordered them to work out an action plan to tackle the crisis.
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Associated Press Writer Olga Bondaruk contributed to this report.
