Taking Aim at Profiteers
Bankers promise the dollar rate will drop
Last Friday it was reported that the National Bank of Ukraine (NBU) lowered the upper limit of the hard currency cash that banks can buy during the trading session on the interbank stock market from 40% to 20% of their overall daily limit of credit operations with the NBU. It is difficult for people outside the banking community to grasp the significance of this report. What it boils down to is that this decision was caused by a reduction in the public demand for ready foreign currency. The NBU cabled to the banks that it made this decision because the volume of their foreign currency cash holdings has increased. In a nutshell, anxiety in the currency market is abating.
Our bankers, as well as their counterparts all over the world, detest the very word “crisis,” let alone a crisis. “This country’s currency market showed no signs of a financial crisis,” the NBU’s acting governor Arsen Yatseniuk said last Wednesday. “This was an ordinary instability that can occur in any country, even the most affluent one. We can be proud of the fact that we were able to keep it within reasonable limits and avert a true crisis.”
It is widely believed that the current problem resulted from the unstable political situation on the eve of the elections. Bankers flatly deny any involvement in the revival of a hard currency black market. This was, incidentally, on the agenda of a banking conference that bore the rather comforting title “Stability of the Banking System Is the Guarantee of Social Development.”
“What caused the panic were statements by our politicians, not the financial and banking system,” Volo dymyr Matviyenko, patriarch of the Ukrainian banking system and Prominvestbank chief, told The Day. “Nevertheless, we should not be so afraid of the word ‘inflation,’ because it is always present (in September the inflation rate was 5.6% —Author). What is important is that the current rate of inflation in Ukraine is lower than the public income growth rate-so the problem does not exist in this country.”
Can one deny with equal vehemence that the public was alarmed not only by rumors about a likely increase of the dollar rate but also by the fact that the banks themselves were flashing disturbing signals that they are now explaining as nothing more than concern for their compatriots? “Our bank has the largest number of branches in Ukraine, and we cater to the most underprivileged strata of the population, namely, pensioners and public-sector employees,” said Oshchadbank [Savings Bank] head Mykola Suhaniako. “We didn’t want to help profiteers, who would come around early in the morning and buy out the entire supply of hard currency in the branch, leaving nothing for other customers. We decided to impose a restriction: not more than 200 dollars per individual.” Other bankers explained their actions as proceeding from exclusively good intentions. For example, Reiffeisenbank chose the following kindhearted method: a customer comes in, fills out a form, hands over money, and receives dollars the next day. Bank president Ihor Frantskevych claims this produced positive results.
Today most bankers believe that the problem has been solved by and large because the demand for hard currency has dwindled — so the restrictions can now be lifted. “I will sign an instruction tomorrow for our bank branches to commence selling hard currency without restrictions because there is just no point to them,” said Ukrsotsbank governor Borys Tymonkin. “The main thing is we have eased tensions around profiteering. As a result, panicky individuals and people who wanted to cash in on the mess have lost out: they used to buy a dollar for 5.4 hryvnias but will have to sell one for 5.25, the rate that will be established soon.”
However, not all banks are so sure that profiteers have been trumped. For instance, Oshchadbank is going to ease, not lift, restrictions — from now on clients will be able to buy 400, not 200, dollars a day at its branches.
The apparent hesitations of some bankers may perhaps be explained by their somewhat naive surprise at the amounts of money that our not-so-rich population has suddenly come up with. In October alone, Ukrainians bought $1.2 billion, with cash accounting for about one-third of this amount, as Ukraine’s central bank reports in its press release. The NBU in fact condemns the shortsightedness of the country’s banking clientele, claiming that now is the time to save, not spend. As for subsidiary banks, the National Bank in fact is pursuing the same policy: the same rules of the game for all banks and a prompt reaction to outside cataclysms. Commercial bankers seem to be quite satisfied with this attitude. “I think the National Bank showed a remarkable performance in the current situation,” Mr. Tymonkin said. “It is unprecedented for a governmental institution to work so efficiently. That they managed to find a reserve of eleven billion dollars to stabilize the currency market situation is only a sign of high professionalism.” It looks like relations in the banking community have even improved after all the pre- election troubles. Financiers believe they have managed, surprisingly, to make a concerted effort and are going to further stand their ground. “We are prepared to take up any challenges to defend the banking system’s stability,” said Oleksandr Suhoniako, president of the Association of Ukrainian Banks. “I think the stability of each of us is the main prerequisite for overall stability.”
