Since the beginning of the year, Ukrainians have withdrawn 16 billion hryvnias from the system and have no intention of returning them.
Against the backdrop of the outflow of funds from the banking system, a number of players have received additional opportunities to increase their deposit portfolios.
Agent banks of the Deposit Guarantee Fund for Individuals (DGF) pay compensation to depositors of bankrupt financial institutions and simultaneously attract them to their services. However, other market participants consider this method of increasing assets to be less than market-based. New opportunities Since the beginning of the year, Ukrainians have withdrawn 16 billion hryvnias from the system and have no intention of returning them. There are several reasons for this, but for bankers, this situation is unusual, as it stems not so much from economic stagnation as from the political crisis in the country. With the onset of autumn, banks typically ramp up their fundraising efforts. However, this year, they doubt they will succeed. However, financiers are not going to let things slide, as they desperately need the funds. It can be assumed that banks that pay compensation to the Deposit Guarantee Fund (DGF) to depositors of bankrupt financial institutions will be in the most advantageous position. They are managing to attract some of these client funds for their services. "We worked with clients of problem banks that received payments from the fund. For them, we added 1% to our hryvnia deposits and 0,5% to foreign currency deposits. We are now offering this increase to clients of all problem banks," says Serhiy Mamedov, Chairman of the Board of Ukrgasbank. As a result, in the second quarter, Ukrgasbank managed to increase its retail deposit portfolio by UAH 711 million. UkrSibbank similarly attracted funds (an inflow of UAH 780 million). "Many depositors who received compensation from the fund entrusted their funds to a bank with foreign capital," says Volodymyr Shevchenko, Deputy Head of Retail Sales at UkrSibbank. "Furthermore, some clients who had previously withdrawn funds from the banking system returned them to us." Access to such resources is available to a limited number of financial institutions acting as agents of the Deposit Guarantee Fund. These are primarily large banks. "Cooperation with the fund primarily requires the agent bank to operate profitably, comply with all NBU regulations, and also have its own transfer system, an extensive regional network, and convenient operating hours. Such banks are inherently attractive to depositors, especially those receiving guaranteed payments. For the agent bank, working with clients of insolvent banks is a significant responsibility—it's essential to restore these depositors' confidence in the banking system. Therefore, a loyalty program—a slight increase in interest rates, discounts on account openings, and payment options—is justified," says Marina Nesterovskaya, Director of the Retail Business Department at Khreshchatyk Bank. Retention strategy To retain clients who have already encountered problems with another financial institution, agent banks offer them more attractive interest rates on deposits. However, other market participants believe that bank rates should be the same for all clients. "If the rate differs, it would be a violation of the law (in particular, the requirements of Article 1058, paragraph 2 of the Civil Code), according to which the deposit agreement is public, meaning it must contain the same terms for all counterparties. It's clear that banks offer more favorable terms to depositors who have already encountered problems with deposit repayment, but from the standpoint of ensuring equal conditions for all clients, issuing deposits with a higher interest rate is illegal," notes Konstantin Varnin, Deputy Head of Retail and Small Business at Industrialbank. As a result, approximately half of the depositors receiving compensation from the Deposit Guarantee Fund deposit their funds with the bank that makes the payments. "As a rule, this category of clients consists of those whose deposits (in deposit, current, and card accounts, including the accrued interest as of the date of the decision to classify the bank as insolvent) at their previous bank did not exceed 200 hryvnias. These are depositors who have not lost anything and retained confidence in the banking system," says Yuriy Saenko, Vice President of Personal Finance at Diamantbank. "Citizens for whom interest is a direct source of income in their daily lives also deposit their funds with banks. This group typically places great importance on the liquidity and stability of the bank and, before leaving funds with the financial institution that makes the Deposit Guarantee Fund payment, conducts research on the bank." Additional loyalty Bankers unfortunate enough to become Deposit Guarantee Fund agents consider the above-described method of increasing deposit portfolios to be neither entirely fair nor competitive. "Payments should really only be entrusted to trusted banks to avoid a repeat of deposit defaults. Since the state is the source of payments, it has the right to decide which institutions are entrusted with paying such compensation. But, of course, this is not a truly market-based method of attracting deposits," says Konstantin Varnin. However, the bankers making the payments have a different opinion. "The Deposit Guarantee Fund has a special procedure. To qualify for agent bank status, applicants must meet a number of criteria and possess certain competitive advantages over their peers. This means that the agent bank is selected based on a market-based approach that weeds out less financially stable banks," says Tatyana Nadtochiy, Director of the Product Lab and Curator of Interaction with the Deposit Guarantee Fund at Fidobank. Market participants believe the number of insolvent banks will increase significantly by the end of the year, as many institutions are currently experiencing difficulties with repayment of funds and meeting National Bank regulations. Therefore, the Deposit Guarantee Fund will need new agents, who will thus be able to grow their deposit portfolios. "Depositor management has always been one of the bank's key objectives. This is what's commonly referred to as service quality and customer loyalty. During times of crisis, the most resilient institutions are those that have managed to build a significant share of regular depositors. This is an intangible asset, the value of which, unfortunately, few Ukrainian banks fully understand," says Vasyl Nevmerzhytsky, Advisor to the Chairman of the Board of Eurobank. "As for compensation payments themselves, banks have always shown interest in this process, recognizing that it can help them grow their deposit portfolios and client base. Banks will continue to compete with each other for the right to pay the fund's compensation. However, I don't expect the system to lead to mass bankruptcies, so the relevance of this issue will diminish over time."
