© . FILE PHOTO: The European Central Bank (ECB) logo in Frankfurt, Germany, Jan. 23, 2020. REUTERS/Ralph Orlowski By Balazs Koranyi and Jan Strupczewski FRANKFURT/VERSAILLES () – The European Central Bank is developing a financial facility to rent millions of Ukrainian refugees are turning their savings into hard currency to help them make a fresh start in Europe while fleeing the war at home, three sources with direct knowledge said. More than two million people have fled Ukraine since Russia’s shock invasion last month, and their numbers could rise to more than five million in weeks. Many of them struggle to buy even the bare necessities as their hryvnia savings cannot be converted in most of Europe, meaning they have no means to exchange them at reasonable rates. That, in turn, leaves them prey to unscrupulous traders who offer ultra-low exchange rates. Several ECB policymakers, mostly from the east of the bloc, asked ECB chief Christine Lagarde on Thursday for a joint solution, and the bank is now making efforts to design a facility. “This would be a humanitarian effort of goodwill, rather than a regular policy tool, but we’re still bound by laws, so it’s not like we can just say come, we’ll hide it from you,” said one of the sources. “But we have days, not weeks to find out.” The sources said EU leaders also pressured the bank to act and had asked the ECB to accelerate its efforts. An ECB spokesperson declined to comment. On Thursday, Lagarde said the bank was exploring its options and hoped to have tools “to support the Ukrainian people and the Ukrainian authorities” in the coming days. The problem is that any large-scale conversion is likely to result in financial losses, raising the question of who should bear the costs. In normal times, the ECB would open a direct link with the Ukrainian central bank through a swap or repo line to facilitate the conversion. But such instruments require collateral that the central bank of Ukraine can hardly put up. Without collateral, the legality of an ECB facility could be questionable, the sources said. One option being considered by European Union leaders at their Versailles summit this week is for the EU to guarantee the facility and use the ECB as a facilitator of the transactions. The actual conversions would take place through commercial banks, but under the auspices of the eurozone central bank and supported by common rules. Part of the solution could be to let Ukrainians open bank accounts in Europe and allow them to spend their hryvnia electronically up to a preset limit. Policymakers are under pressure to fix an affordable exchange rate for such a system, which is likely to magnify losses. Individual limits are being discussed, as is the size of the overall facility, the sources said. DESPAIR The problem is urgent as desperate refugees fall victim to some of the few sellers who are willing to take their money. “Some traders offer a very unfavorable exchange rate, which can be seen as a kind of usury,” Poland’s Human Rights Ombudsman said in a statement last week. Poland, outside the eurozone, has seen the largest influx of refugees from its neighboring country, and the central bank has already said a conversion facility will be set up. Poland’s central bank governor Adam Glapinski said on Wednesday that a system will be put in place to allow Ukrainians to sell hryvnias, considering two scenarios. Either the Polish central bank would buy the currency and later sell it to the Ukrainian central bank, or commercial banks would get involved, the second option being considered more likely. The Bulgarian central bank has also said it is working on a facility, while Erste Bank’s local unit allows Ukrainians in Romania to convert about EUR 400 worth of hryvnia.
