Many members of the U.S. House and Senate have complained long and hard about what they say is an out-of-control Federal Reserve Bank. They protested when the Fed took what they considered to be unprecedented measures during the recession, railed against someone other than an elected official making critical decisions about the U.S. economy and complained about what they claim is the Fed’s overbearing regulatory stance. 

But congressional critics of the Federal Reserve should count their blessings: Instead of the Fed, they could be dealing with the increasingly hard-to-explain and harmful actions of the National Bank of Ukraine. 

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There is no doubt about the difficulty of the economic situation in the Ukraine. The value of the country’s currency has recently lost two-thirds of its value and inflation has soared to what for Americans is a hard-to-believe almost 43 percent. 

Ukraine’s political situation is just as difficult. Just a few weeks ago, Vice President Joe BidenJoe BidenSanders keeping door open on 2020 Biden deflects questions about 2020 run at OZY Fest The Hill's 12:30 Report MORE demanded in a speech in Ukraine’s capital city of Kiev that the country quickly move ahead with governmental reforms that he insisted were long-promised and much-needed. 

But Ukraine’s economic and political challenges do not explain or justify the actions by the National Bank of Ukraine that are actually exacerbating rather than alleviating the country’s problems. 

In the midst of one of the worst economic downturns in Ukraine’s history that put serious stress on the country’s banking system, the NBU chose to close almost 60 banks rather than arranging for the strong ones to take over the operations of the weak. This made credit less available to Ukrainians at the precise time that it was most needed and exacerbated rather than alleviated the difficult economic situation.

It also greatly reduced the confidence Ukrainians have for the banks in their country. After the inept way the NBU acted, a survey conducted by The Ilko Kucheriv Democratic Initiatives Foundation this past July 2015 showed that almost 77 percent of Ukrainians did not completely or mostly trust their banks.

The NBU is also making it far more difficult than necessary for the surviving institutions and by doing so it reduced both current and future economic activity.

For example, one of the United States’ responses to the financial crisis was to subject financial institutions to a “stress test,” that is, to require banks to demonstrate that it had the capability to survive under certain harsh circumstances that simulated the difficulties they had experienced during the downturn. The goal was to provide a reasonable level of assurance that the bank would be safe and sound.

The NBU tried to do the same, but did so in such a bizarre manner that it raises serious questions, if not complete doubts, about its competency and real purpose.

A first stress test for Ukrainian banks using commonly accepted international standards was followed up with a second that used NBU-created and never-before-seen requirements that deviated substantially from the first. Significantly, the NBU was anything but transparent about those standards: the methodology and rules it imposed for this second stress test weren’t fully described and explained properly.

Even more important, and far more disturbing, is that it appears the NBU may be using different stress test standards for different banks and that the differences have little to do with anything related to safety and soundness. Instead, the different financial rules and methodologies being applied may well be related to political considerations that make Biden’s words from several weeks ago even more meaningful.

The NBU’s lack of transparency on methodology and rules were of such concern that the Independent Association of the Banks of Ukraine wrote to the International Monetary Fund last month to ask that it intervene in the situation. It specifically cited NBU’s “inconsistencies” in stress test calculations, its “unreasonable overstatement and misrepresentation of stress test results” and a subsequent restatement of each bank’s required re-capitalization using new definitions of acceptable collateral that differed from those applied by IMF itself.

Its no wonder that a survey conducted in March showed that more than 77 percent of Ukrainians did not support the NBU.

That puts the burden on the National Bank of Ukraine to fully, quickly and transparently explain its actions and, as seems likely, quickly modify them to match the international standards...and the needs of the country.

Collender is an executive vice president with MSLGROUP in Washington, D.C.