KIEV, Dec. 17 – The hryvnia was in a freefall on Wednesday, plunging 12% against the U.S. dollar to levels that may shatter Ukraine’s banking system by triggering massive defaults on consumer credits and mortgages.

The hryvnia closed at 9.3 hryvnias to the dollar in trading between commercial banks Wednesday, compared with 8.3/dollar Tuesday, with the National Bank of Ukraine failing to get the situation under control.

This was the hryvnia’s second steep plunge over the past three days after it had lost 8% of its value on Monday, dealers said. The latest trading shows the hryvnia has effectively lost 50% of its value over the past three months in the course of the crisis.

President Viktor Yushchenko said he was “seriously concerned” with the hryvnia’s rapid loss of its value and scheduled on Thursday an emergency meeting with Volodymyr Stelmakh, the governor of the National Bank of Ukraine, and Viktor Pynzenyk, the finance minister.

“Today we breached the psychological level of nine hryvnias per one dollar,” Roman Zhukovskiy, the head of the economic department at the office of Yushchenko, said. “This was an explosion of the exchange rate, the same that we had seen at the end of November, when we thought there was a sort of equilibrium.”

The NBU has been selling undisclosed amount of dollars on Thursday - at 7.66 per dollar - but the effort had little effect due to skyrocketing demand for dollars, dealers said.

The rapid plunge of the hryvnia against the dollar increases the risk that the banking system may face significant challenges facing imminent failures by borrowers to keep making debt payments.

A recent survey of bankers, according to the presidential office, suggests the drop of the hryvnia to 9 hryvnias per dollar would turn the number of bad loans in the banking system to 60%. At the exchange rate of 7 hryvnias per dollar, the amount of bad loans is contained at more manageable 25%, according to the survey.

Many Ukrainian borrowers have been taking consumer credits and mortgages as the market for these services had exploded over the past three years, but the crisis reduces their earnings, making the borrowers more likely to default.

Other borrowers have taken U.S. dollar denominated loans, but now, with the decline in the hryvnia’s value, these borrowers face difficulties of exchanging their hryvnia-denominated earnings to dollars, also boosting the risk of default.

At the emergency meeting on Thursday, Yushchenko, a former central banker, will address the escalating financial crisis and will suggest a new plan to rescue the hryvnia from the collapse. The new plan will be different from what the NBU - and the International Monetary Fund - have so far been suggesting to do.

“A clear plan of actions will be developed that we will be able to see it in the near future,” Zhukovskiy said. “It will be little-bit different from the current philosophy that had been suggested by the NBU and the International Monetary Fund. The key point in these measures will be maintaining stable exchange rate.”

“I think that within the next two weeks we will have a realistic understanding of whether we have been able to keep the balanced exchange rate,” Zhukovskiy said. (tl/ez)