Cheap loans are the only salvation for Ukrainian business, the chairperson of the State Service for Regulatory Policy and Entrepreneurship Development Mykhailo Brodsky maintains. He stated his opinion at a briefing in the Cabinet of Ministers when commenting on Ukraine’s last place among European nations in a ranking of economic freedom.
“I propose to adopt a law based on the American document which they adopted in 1933. That law strongly limited deposit and credit rates, setting them at, respectively, 3 and 6 percent in America at the time. I think that Ukraine can put them at, say, 6 and 12 percent,” Brodsky said. “Running business with credit at 25 percent is an impossible proposition. At the same time, public finds depositing money at 20 percent more profitable than starting businesses.”
According to Brodsky, the adoption of a similar law has allowed Spain out of recession, and Russia is adopting similar restrictions as well.
Let us note that the National Bank of Ukraine’s December 2013 data listed average deposit rate at over 18.7 percent per annum, with many banks offering 20 percent or more. Under such conditions, lowering the cost of credit looks unrealistic.
Meanwhile, bankers see the idea of administrative restrictions on deposit and credit rates as an absurdity. “It is an absurd idea. In any more or less developed economy, deposit and credit rates are determined by many factors, including supply and demand. Banks’ demand for deposits is currently frenziedly elevated... Artificial limits are totally out of place here. It would be like limiting price of sausage to three hryvnias per kilogram,” adviser to the chairperson of a major Ukrainian commercial bank Viktor Lysytsky maintained.
