The effect on the real economy was profound, particularly in Victoria where a disproportionate share of the financial failures occurred.7 It was a salutary experience, but fortunately many lessons were learned both by the private-sector participants and by the regulators. From an international perspective, it would be easy to gain the impression that financial instability is on the rise.
That's why we started to adjust our policies. First, the NBU started to withdraw liquidity support measures for banks. Second, at the beginning of June, the NBU raised the key policy rate considerably, to 25%, to boost the attractiveness of assets priced in the national currency, and ease pressures in the foreign exchange market.