Ukrainians will have to choose more carefully which bank to trust.
The National Bank of Ukraine (NBU) has compiled a list of more than ten small and medium-sized financial institutions to be removed from the market and passed it on to the management of the Deposit Guarantee Fund (DGF). A banker close to the regulator's leadership told Kapital this. The list includes Zlatobank, the All-Ukrainian Development Bank (VBR), CityCommerce Bank, Piraeus Bank, Marfin Bank, Bank Cambio, Unison Bank, Omega Bank, Legbank, Astra Bank, and several other financial institutions. In total, approximately 30 financial institutions may be removed from the market in two batches in the coming months. To this end, the fund is currently actively recruiting new, qualified employees to serve as temporary administrators.
Queue to exit
The official reasons for the upcoming withdrawal of the aforementioned financial institutions from the market are their involvement in illegal money laundering and insolvency. Unofficially, some of them are being punished for their ties to President Viktor Yanukovych's "family." For example, one bank on the list, VBR, is owned by Oleksandr Yanukovych.
The Deposit Guarantee Fund continues to deny the existence of such lists. "Perhaps there is a list of problem banks, but for reasons of banking secrecy, we cannot name them. As soon as a decision is made to declare a bank insolvent, we will announce it on our website," the fund's press service reported.
"I believe it's absolutely the right decision to withdraw all banks at once. This cleans up the payment system and the relationships between banks, and prevents problems at the level of insolvent financial institutions. The presence of insolvent banks forces other financial institutions to close interbank limits with each other," commented Anatoly Guley, Chairman of the Board of the Ukrainian Interbank Currency Exchange. He believes the withdrawal of the aforementioned financial institutions is unlikely to negatively impact the market, as these banks have not been particularly active for several months.
The individual deposit portfolio of ten banks, which may soon be under temporary administration, amounts to UAH 10 billion.
The decision to remove banks associated with the previous government from the market is not solely politically motivated, according to Anna Apostolova, head of the financial ratings department at IBI-Rating. She believes that these financial institutions were often used for shady transactions that inherently carried increased risks.
However, Vitaliy Shapran, a leading analyst at the Expert Rating rating agency, disagrees with this position. According to him, liquidating banks based on ties to the previous government or suspicions of money laundering is an unaffordable luxury for the NBU today. The banking sector crisis was one of the main reasons for the hryvnia's decline, Shapran explains, and escalating the situation by increasing the debt burden on the Deposit Guarantee Fund is "an irrational decision."
"It's a different matter if the NBU, the Prosecutor General's Office, or the Security Service of Ukraine have evidence of the involvement of certain banks in money laundering or terrorist financing, then such financial institutions can be nationalized. I'm surprised that the state continues to burden the fund with an unbearable burden, destroying the integral assets of operating banks instead of allowing them to benefit as state property," he added.
Operation Liquidation
According to Apostolova, the main problem facing the listed banks is deteriorating asset quality. Furthermore, the outflow of client funds from accounts has triggered liquidity problems. However, based on their financial statements, only a fraction of the listed banks violate NBU regulations. For example, of the entire list (see infographic), only Legbank violates the regulatory capital adequacy requirement (8,9%, while the regulator requires at least 10%).
Bank Cambio's inclusion on the list was also predictable. Capital predicted back in late October that the NBU would soon seek to remove it from the market. The bank's financial position leaves much to be desired. As of the third quarter, it violated several prudential requirements—for example, the maximum credit exposure per counterparty. Bank Cambio's maximum exposure per counterparty was 32,72%, while the regulator requires no more than 25%. And the bank's current liquidity ratio, according to its financial statements, was 0%, while the required minimum was 40%.
It's worth noting that European banks, such as Cyprus-based Marfin Bank, were also blacklisted. Following the bankruptcy of Marfin Bank's parent company, its manager, the Bank of Cyprus, repeatedly attempted to sell it, but to no avail. During this time, the bank significantly reduced its branch network, losing qualified employees and quality clients. "The bank has undergone several waves of layoffs. It's unlikely the owner would be interested in bearing the costs of recapitalizing Marfin Bank," said a Marfin Bank employee, who wished to remain anonymous.
According to a Capital source at the National Bank of Ukraine (NBU), financial institutions where the Deposit Guarantee Fund has already placed temporary administrations for operating conversion centers and illegal money laundering (Axioma Bank (formerly Sigmabank), InterCreditBank, Melior Bank, Green Bank, and AktaBank) will be liquidated even if they have buyers.
Banks with enviably high capital adequacy ratios raise suspicions from the NBU
Capital
Subscribe to our channels in Telegram, Facebook, Twitter, VC — Only new faces from the section CRYPT!