European Central Bank plans foreign exchange program for Ukrainian refugees
Mar 29, 2022 6:29:37 p.m.
The European Central Bank is ready to organize a program allowing millions of Ukrainian refugees to exchange their hryvnia for euros if the EU gives the ECB a guarantee that would cover the bank’s risk, according to an ECB document.
Nearly 4 million Ukrainians have fled the Russian invasion into the EU, but they are facing problems exchanging money as few banks want to buy the currency of a country engulfed in war, Reuters reports.
Sources said earlier in the month that the ECB was working on a currency conversion facility, but the document for the first time sets out options on how this could be achieved.
“The preferred option would be for the ECB and the national central banks of the Eurosystem to act as fiscal agents for the Union,” says the ECB document, sent to the European Commission last week.
Under this option, EU governments would mandate the ECB to implement the program and, in order to comply with the ban on monetary financing of governments by the bank, they would provide the bank with the money necessary to fulfill this mandate.
“The alternative option is based on a mandate given to the ECB by the Central Bank of Ukraine,” the ECB document states.
The ECB would sign an agreement with the central bank of Ukraine to act as agent and the EU, through its budget, would provide a guarantee to cover the risk that the central bank of Ukraine would not be able to honor the agreement due to the war.
The agreement would include the exchange rate for the exchange of hryvnias into euros, the maximum amount and the duration for which the system would be operational.
While the ECB’s proposal relates to euros, the bank said it could be extended to include EU countries that do not use the euro.
Most of the refugees have headed to Poland, which says it has taken in 2.3 million people so far. The other EU members, Romania, Slovakia and Hungary, also registered large numbers of arrivals. Of these, only Slovakia belongs to the single currency.
An EU official said there was broad support among EU countries for an EU-wide guarantee proposed by the ECB, as it would mean the system’s risks would be shared more equally between EU countries.
Now, they mainly affect the national central banks of the countries where the refugees are the most numerous.
The ECB proposal is separate from another plan currently under consideration by EU governments under which each Ukrainian refugee could exchange up to 10,000 hryvnias (311 euros) in an EU currency during three months, with each EU country managing the financial risk of the exchange alone. .