Ukraine recently set another national record. The Austrian Raiffeisen Bank has already paid 1.04 billion dollars for Aval, Ukraine’s second largest bank. Now, 85.42 percent of shares in Ukrsotsbank have been sold to Italy’s Banca Intesa for 1.161 billion dollars. After the completion of an additional emission currently underway (although denied by a minority stockholder) the Italians will pay another 60 million dollars. Anatoliy Shapovalov, first deputy head of the National Bank of Ukraine, predicts that this sale will increase the share of foreign capital in the Ukrainian banking system to 24 percent (at the start of this year there were 23 banks with foreign capital in Ukraine, of which 9 had 100 percent foreign capital).
At one time, the Association of Ukrainian Banks expressed concern over the influx of foreign banks. Now it is a fait accompli. However, the process must be controlled. Since parliament failed to ratify a law on foreign bank branches’ access to the Ukrainian market, the NBU is drafting a document that will regulate foreign capital’s access to Ukraine. “However, there is no question of limited access in principle,” says Shapovalov. “Perhaps there could be restrictions on access for foreign state banks. Take Russia. Their Savings Bank and Foreign Trade Bank are owned by the state. A limit will be set.” This approach on the part of the Asssociation of Ukrainian Banks is probably satisfactory. The people at the headquarters of Ukraine’s bankers are well aware that the Ukrainian banking system can only benefit from competition with worthy partners.
Ukraine’s expert community has also reached a similar conclusion. Experts believe that investments by large foreign banks in Ukraine will boost this country’s investment attractiveness in general and its banking system in particular.
The influx of foreign banking capital increases Ukraine’s investment attractiveness, says Viktor Marchenko, project coordinator of the European Bank of Reconstruction and Development (EBRD), adding, “The more direct foreign investments we have the better. Everybody knows banks like BNP, Intesa, and Raiffeisen. When others see these banks buying something in Ukraine, paying large sums to be here, this is proof that these banks regard Ukraine as investment-worthy,” says this expert. He believes that among the positive results of the influx of foreign capital to the banking sector are capital formation and assured access of Ukrainian banks to international financial markets and effective managerial processes, ranging from credit procedures to new software that will allow loans and manage risks and disbursements to be issued more effectively. “These banks will offer new services to individual customers, primarily through new credit products. Everybody expects more attractive interest rates. Other banks, orienting themselves on the market leaders, will improve their procedures and processes, competition will increase, and this will result in more attractive credit conditions,” Marchenko says with conviction.
Dmytro Sviatash, member of the Verkhovna Rada’s Finance Committee, believes that in the long run the influx of banking capital will benefit industry and the population. He predicts an increase in the reliability of the banking system and lower interest rates that will provide less expensive credit resources and longer loan terms. Sviatash says that new banking products, which are still underdeveloped, will appear in Ukraine, like financing of export contracts at low tariffs and financing of import contracts. “These banks always pay all their taxes. There will be a totally different tax payment standard that these banks will introduce into the banking system of Ukraine,” Sviatash says. At the same time he believes that Ukrainian banks are not prepared to work according to this new standard and that they will lose out in the competition. “The top 10, top 20 bankers will look totally different,” says the parliamentarian.
Serhiy Pukas, the chief expert of the Department of Economic Policies at the Ukrainian Association of Industrialists and Entrepreneurs, believes that the population and business will benefit from the arrival of large foreign banks in Ukraine. “Domestic and Western banks are competing with each other and this may result in lower interest rates,” this expert believes.
Another equally important aspect is that Ukrsotsbank was sold not to the first buyer but obviously to the highest bidder. According to Shapovalov, three foreign banks vied in the bidding: Italy’s Intesa, France’s Soci О t О G О n О rale, and Hungary’s OTP Bank. The Bank of Moscow has studied the possibility of buying this Ukrainian bank.
