Banking Without a Permit
The Association of Ukrainian Banks (AUB), representing 125 out of the 154 existing banks, held its tenth jubilee congress on June 14 in a woodland resort near Kyiv. The function was attended by Anatoly Kinakh, Prime Minister of Ukraine; Volodymyr Stelmakh, Governor of the National Bank, and a number of ministers. The agenda items did not exactly suggest an occasion for celebration: the strategy and main guidelines for 2002-2003 and a debate on the ever-narrowing legislative and regulative field in the banking sphere. It is only real economic growth and increased professionalism that allow bankers to maintain such an important overall indicator of the banking system as the level of individual and institutional trust. Whatever the case, banking deposits are rising.
However, this pleasing circumstance will not warm the relationship between the banking systems and the government, which continues to insist that commercial banks reduce their high interest rates. The government head could not help broaching this subject at the bankers’ jubilee congress. “We are going to further address this problem,” the prime minister assured the audience. But this time the soldier seems to have run short of valor. According to Mr. Kinakh, the government of Ukraine will not exert administrative or political pressure to force commercial banks to cut their loan discount rates. The premier believes this can be achieved by improving the law, mapping out a flexible regulatory policy by the National Bank, and establishing a regular procedure of the bankruptcy and reorganization of enterprises.
Meanwhile, on the eve of the congress, the names of banks and bankers had more often been hitting the criminal rather than financial pages of media reports. The Prosecutor General’s Office announced recently that it had completed investigating two episodes of the Ukrayina Bank case. Five defendants now in custody are reading the criminal case materials. The investigation of three more individuals, including former bank president Viktor Kravets, is expected to be finished in July. The State Tax Administration of Ukraine (STA) is also investigating the old and opening new criminal cases against the executives of some commercial banks. According to STA Deputy Chairman Sviatoslav Piskun, they have been accused of money laundering and abuse of office. The tax collectors’ hit list includes executives of the Ukrainian Credit Trade Bank (former Geosantris), BIG-Energy (former Zevs), and Nadra banks. Former governor of Slovyansky Bank Oleksandr Feldman and Deputy Chairman of the Board of the Andriyivsky Bank Oleksandr Okhrimenko have already been convicted.
Ukrainian banks are also in the focus of the international community because the latter tries to avert the danger of terrorism, stemming the tide of dirty money that can only be laundered at legally-existing financial institutions, the more so that Ukraine, in addition to some other countries, is on the blacklist of FATF (Financial Action Task Force), an international organization combating the laundering of illegal income. In this connection, the National Bank (NBU) is determined to inspect the foreign subsidiaries of Ukrainian banks. Moreover, as part of the struggle against money laundering, it is taking what may be described as draconian measures against banks, their owners, and shareholders. From now on, to own a considerable stake in a bank, shareholders will have to seek written NBU permission by presenting proof of their immaculate reputation. Otherwise, on the basis of the law On Banks and Banking, the NBU will deprive shareholders of their hitherto inalienable rights. In addition, the banks themselves will be assigned the untypical role of moral overseers.
Addressing the congress, bankers subjected this trend to criticism. AUB President Oleksandr Suhoniako noted it was necessary to clearly delineate the functions of financial control. In his view, the banking system “is prepared to help the state combat money laundering but not to assume the functions of a state oversight body.” He also said banks were prepared to do their best to have Ukraine struck off the FATF’s blacklist.
Undoubtedly, the country’s prestige demands that all suspicions about the involvement in or connivance at money laundering should be allayed. But at the same time this should neither damage the prestige of the banking system nor undermine the public trust in it. In any case, as Sviatoslav Piskun, tax police deputy chairman and chief of the investigation department, emphasized to The Day that all investigative actions are being done so as to avoid causing excessive damage to banks and the banking system as a whole.
