In this century none of the European countries has lived through a situation when their banking system is under an effect of gory events of an undeclared war. This was emphasized by the Governor of the National Bank of Ukraine Stepan Kubiv when he gave a speech at the Ukrainian Verkhovna Rada session on June 18, 2014. He informed those present about the situation in the banking sector of Ukraine and told about the financial implications for the state of the armed aggression as well as the life threat for banks’ employees and clients in the Eastern and Crimean regions.
He reminded the audience of the impact on the Ukrainian banking system’s liquidity and solvency in the Autonomous Republic of Crimea. In particular, the Crimean region banks’ assets alone exceeded UAH 20 bln - this is the operation of 1022 offices, 2 Crimean banks and 53 representative offices. At the same time, the banks with the most extensive branch networks together with the Ukrainian Government ensured timely payments of social benefits, pensions, grants and redemption of deposits.
According to the Governor Stepan Kubiv, nowadays, the terrorist activities in Luhansk and Donetsk regions, particularly the seizure of the National Bank of Ukraine regional offices and other financial institutions make it virtually impossible to conduct banking transactions, payments, settlements and social transfers. Only owing to cooperation of the President, Government and the National Bank of Ukraine, urgent measures were taken during 24 hours to ensure the settlement and financial operations and transfer of the clearing house units functions.
"Despite the terrorists’ seizures of the National Bank of Ukraine’s regional offices in the Autonomous Republic of Crimea and Donetsk region as well as their numerous acts of assault on banks, the banking sector in Ukraine will continue to operate, protect its depositors and finance the economy", – accentuated the Governor of the National Bank of Ukraine. He believes that the top priority task is preservation of the wholeness and integrity of the Ukrainian financial system.
At the same time he noted that the last 4 months have seen a considerable outflow of the household deposits from the banking system exceeding UAH 80 bln, whereas in February it amounted to UAH 31 bln, UAH 23 bln in March and UAH 15.8 bln in May. "The shift towards a deposit inflow to the banking system has been a positive signal for the banking system and a result of our efforts. The deposits amounted to UAH 0.4 bln during June 1-12, 2014", - said the Governor of the National Bank of Ukraine.
The renewal of cooperation with IMF and opening of a USD 17 bln credit line were named by Stepan Kubiv as the key factors for financial system stabilization. The new IMF program has become a signal for a larger scale financing from other international financial organizations that also provided Ukraine with a financial support in an amount of USD 25 bln and EUR 11 bln.
Working under time and resource constraints, the National Bank as the lender of last resort provided the banking system with the liquidity necessary to the functioning and ensuring of depositors’ interests. At the same time, the NBU has launched a diagnostic study of the major banks in order to assess the reliability of the banking system and the confidence in the individual banks, as well as to determine the need in additional capital to ensure the solvency and liquidity of banks.
Stepan Kubiv has reported about the measures taken by the National Bank to prevent the use of the banking system for money laundering. In order to prevent the banks clients from performing the cash transactions involving significant amounts which may be a sign of illegal activity, starting from February 27, 2014, the National Bank of Ukraine has carried out 19 inspections in 14 banks and two branches of banks of the 3rd and 4th Groups. During those inspections in the course of 2012-2014 it was ascertained that using the banks cash departments customers (individuals and legal entities) withdrew cash for a total amount of more than UAH 240 billion (including in the foreign currency).
During his speech, Stepan Kubiv drew attention to the start of systemic work on the new long-term strategy of the Ukrainian banking sector development. Its main areas envisage transition to the modern monetary policy based on inflation targeting and flexible exchange rate, and the efficient consolidation of the banking system as well as optimization of the National Bank operation. All these measures will boost the confidence of depositors and investors and foster sustainable economic growth in Ukraine.
Thus, the Governor of the National Bank is convinced that in spite of the existing problems we should start building our future today, and suspension or denial of the reforms and chosen direction can throw the financial sector back into the past.
"At the same time, we gradually increase the transparency of our relationships with the society and the business community" – said Stepan Kubiv and reported about the establishment of the Public Council under the National Bank of Ukraine to protect the rights and interests of consumers of the banking services. The Public Council includes representatives of the civil society, banks and professional associations, Household Deposit Guarantee Fund and others.