The parliament has just returned the bill No. 0884 “On Amending Some Laws of Ukraine (Regarding the Regulation of Banks’ Activity)” for improvement. As it is known, the first reading of this document in the Verkhovna Rada provoked a lot of criticism on the part of the biggest associations in the field. They unanimously stated that if the document was approved, the domestic bank sector would considerably decline because small players would be eliminated from the market.
In their press release, the Ukrainian Credit-Bank Union (UCBU) points out that the bill No. 0884, which was approved in the first reading, presupposes delegating to the National Bank of Ukraine (NBU) the authorities of the parliament to set capital requirements and the introduction of the manual mode of bank regulation. In the future, the UCBU believes, this can “lead to artificial redistribution of the bank market and the elimination of two thirds of Ukraine’s banks.”
The Association of Ukrainian Banks (AUB) adds that at present “a plot has been hatched against the whole segment of Ukrainian banks,” directed to oust hundreds of players from the market. Therefore, the AUB suggests “removing the administrative pressure from the banks with Ukrainian capital” by canceling the resolution of the NBU No. 273, which makes the banks form a regulative capital in the amount of no less than 120 million hryvnias by January 1, 2012. After that, the AUB assures, it is necessary to remove the article about increasing the minimal statutory capital of banks to 500 million hryvnias (at present it constitutes 75 million hryvnias) from the bill No. 0884.
Will the improvement remove all debatable sections of this document? What should the banking sector expect if after the bill is revised its content is not changed considerably? The Day asked bankers and experts what they think about it.
COMMENTARIES
Viacheslav YUTKIN, the first deputy head of the board, Prominvestbank:
“Raising the requirements of the National Bank in the part about the statutory capital increase is the right step. The results of the crisis showed that precisely small banks lack capitalization. This created big tension in society. Raising the capital requirements means that now everyone wishing to set up a bank will understand: a bank can’t be baked as easily as a pie. One should have big sums of money, which guarantee returning them to the clients. However, in my opinion, in these circumstances it is necessary to create equal conditions for all banks so that they can fulfill the set tasks. That is there should be a transition period of five to seven years. Only this way can the market avoid monopolization, and all owners of current banks will be able to increase their statutory capital to the required level. In my opinion, small and medium business will suffer a lot because of the decrease of the banks’ number, for mostly small banks are actually credited by the industrial-financial groups that created them. According to my estimates, if the bill is approved, 40-80 small banks will leave the market. The rest will survive.”
Oleksandr OKHRIMENKO, president of the Ukrainian Analytical Center:
“The appearance of this bill is long-awaited and necessary for the market. It will bring more use than harm. In my opinion, in order to reduce different cataclysms and minimize risks of bankruptcy among banks, the NBU must strengthen the financial reliability and stability of these financial institutions. Therefore, raising the requirements regarding the amount of bank reserves is quite justified. Ukraine does not need banks with little capital, since they give credits while having a small statutory capital. Thus, they face big risks, which can become real if their customers become insolvent. Besides, according to the official statistics of the NBU, the 40 biggest Ukrainian banks credit 90 percent of the market, and 140 banks cover the remaining 10 percent. So one should not expect that there will be no credits if they disappear. In addition, I do not think that after the document is approved small players will leave the market in bulk. Their owners will find the money and banks will become more reliable, or these institutions will transform into non-banking financial companies, which will be able to accept deposits and give credits, simply their capital requirements are much lower than those of banks — three million euros. The need for this bill, in my opinion, is also determined by the fact that it regulates a lot of other issues which are important for the financial sector: relations between borrowers and creditors, responsibility of banks for unfair competition, etc.”
Stanislav ARZHEVITIN, the first deputy head of the parliamentary committee for finance and banking activity:
“The document contains a few ‘bombs.’ Increasing the statutory capital to 500 million for new banks is one of them. However, we understand that in normative practice the minimal statutory capital, according to the law, automatically becomes normative. This means that one day the NBU can make a decision according to which the regulatory capital of banks should be not smaller than the statutory capital (that is 500 million hryvnias). If this law was adopted and such a resolution appeared, this would destroy 128 small banks. The danger of their disappearing also lies in the fact that the chances of small and medium businesses to get credits will decrease as well. Since it is precisely these banks that work with small and medium businesses. These are their businesses partners. In addition, this bill increases economic dependence on foreign banks.”
Pavlo KRAPIVIN, the first deputy head of the bank Kontrakt:
“This bill is wrong because any actions on the financial market should be balanced, not abrupt. One cannot suddenly increase the statutory capital of banks by eight times, because it can lead to the market’s loosening. However one shouldn’t expect that the results of the introduction of this bill will be too deplorable. I think that most banks will handle it and will find money to increase their capital.”
