Panic and anxiety spur excess demand
The National Bank of Ukraine has banned the banks to pay out dividends starting from September 23, 2014, said Chair of the NBU Valeria Gontariova, RBK-Ukraine (РБК-Україна) reports.
“Panic really causes excess demand. Moreover, excess demand on the cash market is expressed by both population and business circles. For example, from today, the National Bank of Ukraine will temporarily bar, for a period of military actions, to pay out dividends. Distribution of dividends is absolutely legal transaction, but if this excess demand is being increased by both population and businesses, taking into account that they used the dividends earlier to reinvest into their business, while now they attempt to withdraw them. Thus, we’ve made a decision to limit the withdrawal of both dividends and money through sale of securities, except government securities. We introduce all these restrictions because any panic in the market can lead to the significant outflow of deposits from the domestic banking system, what, in its turn, can have a negative impact on the financial stability of the entire country. Thus, this is a consolidated decision made by both the central bank of Ukraine and all other banks”, - said Gontariova.
Pursuant to resolution of the NBU No.91 dd. September 22, starting from September 23, it is prohibited to remit foreign currency dividends to the investors domiciled abroad, except remittance of dividends paid on securities circulating on a stock exchange.
