OREANDA-NEWS. The European Bank for Reconstruction and Development (EBRD) has joined forces with leading Ukrainian financial institutions to give a significant boost to the money markets in Ukraine through the creation of the KievPrime Offered Rate (KievPrime) - a reference for short-term Ukrainian interbank interest rates.

According to the EBRD press service, the new reference rate should enhance the transparency and efficiency of the Ukrainian money markets, as the contributing banks commit to trade with each other at the quoted rates within a narrow bid-offer spread. As a credible reflection of the market, rather than a theoretical indication, KievPrime should help to increase market liquidity and pave the way for the issuance of floating rate bonds and loans denominated in Ukrainian Hryvnia ("UAH").

KievPrime is an independent reference rate calculated daily by Reuters based on offered inter-bank deposit rates in UAH as quoted by leading participants in the Ukrainian money market. The eight local commercial banks contributing reference rates were selected on the basis of their reputation, credit standing, and expertise and activity in local capital markets. These are: Calyon Bank Ukraine, Citibank Ukraine, Erste Bank Ukraine, ING Bank Ukraine, Raiffeisen Bank Aval, Ukreximbank, UkrSibbank, and Ukrsotsbank,

KievPrime is calculated for overnight, one week, 1-, 2- and 3-month tenors, which are provided by the contributor banks daily at 12pm. After the banks have submitted their rates to Reuters, the KievPrime fixings will be available on Reuters pages.

According to Manfred Schepers, EBRD Vice-President Finance, KievPrime is an important step for the Ukrainian capital markets. "A clear interest rate benchmark is critical to the transparent pricing of inter-bank lending rate, which not only enhances the market for bonds and derivative instruments, but is also key to the development of hedging instruments, " he said.

The establishment of the new index follows the similarly successful introduction of money market reference rates in Russia and Kazakhstan with the support of the EBRD. Indeed, since the launch of the Moscow Prime Offered Rate ("MosPrime") in early 2005, the EBRD has launched 3 floating rate Rouble bonds linked to the index for a total of Rouble 15 billion (USD 610 million equivalent), and arranged over 30 MosPrime-linked loans on a bilateral and syndicated basis for a total of Rouble 67 billion (USD 2.725 billion equivalent). Borrowing and lending in the local currency, which reduces currency risks for borrowers whose revenues are primarily or exclusively in the local currency, form a key part of the EBRD's objective to develop domestic capital markets.

The EBRD has been traditionally active in developing Ukrain's financial sector and promoting new banking products important for the proper functioning of a market economy. Recent important development projects include a $200 million framework for financing private-sector micro, small and medium enterprises, a $30 million mortgage lending framework to assist local banks in development of their residential mortgage lending activities and a euro 100 million Ukraine Energy Efficiency programme to tackle Ukraine's energy intensity. The Bank has also arranged syndicated loans with the longest maturity available to local banks. As of the end October 2007, it had committed over euro 3 billion through more than 150 projects.

The next EBRD Annual Meeting will take place in Kiev on 18 and 19 May 2008.