Shall we resist, run, surrender, be happy, or just think it over?
The Friday before last, the general meeting of Kyivinvestbank shareholders decided to rename the facility Alpha Bank. As the press release points out, the increase of the authorized capital owing to a new floating of shares will allow the Ukrainian Alpha Bank to be among Ukraine’s top ten lending organizations: “The ultimate aim of this business restructuring is to set up a financial supermarket in Ukraine” in line with the strategy adopted by the Alpha Group consortium.
Thus banks are also making their way to this country, following Russian big industrial capital, which is now taking an active part in the privatization of Ukrainian industry. People with certain fantasies will easily call up a frightening series of associations: suffice it to replace one letter in the word and peaceful financial institutions will turn into formidable tanks ramming against the foundations of Ukrainian independence and trampling upon the first sprouts of national capital. However, some pragmatists can also feel uneasy: it is common knowledge that when a supermarket comes to the neighboring street, commercial kiosks see their profits slide. For this reason different people will be putting different punctuation marks and conjunctions in this article’s subtitle. Yet, it is with the supermarket that ephemeral national interests rapidly and naturally give way to buyer—consumer—borrower interests, meaning that now the victory of an “alien” in competition is not to be interpreted as an utter defeat, and only our national pride has to pout — and not without foundation — like an offended lady. In the seven months that passed since the first injection of Alpha-money into a formerly small bank born in the town of Korostyshiv, its authorized capital has increased to UAH 73 million, the number of clients by 2.7 times, the attracted hryvnia and hard-currency amounts by 9 and 42 times respectively, while the total money mass and cash-registered-business incomes have doubled and increased by 82% respectively.
The injection of foreign, especially Russian, bank capital into this country is an event much more extraordinary than just opening a new commercial branch of a major firm. As a rule, banks follow industrial investors who have already established themselves in a given country with the help of those same investors, and now, the vigilant say, the time has perhaps come for them to reap and take the harvest. However, this can hardly apply to Alpha Bank at this time: the related Tiumen Oil Company has indeed acquired a LyNOS stake and the bank is opening its branch in Lysychansk, but this multinational still has to pay off all the old debts... Moreover, the bank management says they have come to Ukraine not to service any one company.
An intelligent financier will not challenge the idea that the advent of any kind of money to a country is good, for it helps create jobs and boost budget revenues. It is also evidence of a favorable investment climate. In addition, as Andriy Kosohov, deputy chairman of the board of governors of Alpha Bank, claims, the capitalization level of Ukrainian business and financial institutions is very low. While “there is no other place (except Russian and international banking structures — Auth.) for banks to borrow money to form their capital,” we are being offered a structure through which a wide stream of money will flow into Ukraine.
Without casting doubt on the words of the respected Russian and international bankers, who displayed no qualms even during the Russian financial crisis of 1998, we nevertheless decided to seek the opinion of their Ukrainian counterparts about this issue. Oleksandr Suhoniako, president of the Association of Ukrainian Banks, declined to comment on this (“I am quiet as a clam”), perhaps finding in this situation something contrary to his own convictions. Other bankers have also shunned the political side of this problem. This seems to demonstrate the not always clear and consistent policy of Ukrainian multidirectional policy which often mixes up or is even completely unaware of the difference between such things as friendship and interest. The opinions of our experts could be summarized by the formula of two for and one against. We have already discussed the pros, while the anti concept is based on the experience of everyday life, which says that promising to marry and getting married are by no means the same.
Eduard Rozenblat, treasury director at Ukraine’s prominent Aval Bank, explained to The Day the “strength” of the Ukrainian banking system: “The aggregate capital of the top ten Ukrainian banks is equivalent to the capital of Russia’s fifth bank; on the other hand, the capital of Russia’s top ten banks equals that of Poland’s fifth bank, while the capital of Poland’s topten banks is smaller than that of the fifth bank of Germany, and so on.” In his opinion, competition with foreign banks is, on the one hand, useful for our banking system but, on the other hand, Ukrainian banks are afraid of it. “Take, for instance, interbank interest rates. They were the same in Russia and Ukraine two months ago. Today, they are 20% per annum in Ukraine and 6% as before in Russia.”
Does this mean the Russian subsidiary bank can by way of reciprocal loans reap a significant advantage over Ukrainian banks? What pacifies the Ukrainian bankers is the fact that money cannot come very fast; moreover, Russian banks also have quite a few problems of their own, which hinder active investment in the Ukrainian economy. Moreover, the policy the Russian banks conduct to invade Ukraine differs from that of Western banks. Ukraine has been up to now a venue of venture operations and stock-market speculation, so familiar to the Russians since privatization began there. It was decided not to ignore this experience. But what, according to The Day’s experts, the Russians set their eyes on in Ukraine is transit. The more so that it would be unnatural not to seize the opportunity arising from different tariffs for Europe and Ukraine: on paper something is supplied to Ukraine but then is forwarded on.
Nonetheless, an unambiguously positive conclusion has been made about the advent of Russian bankers: this stimulates the competition of banks and, although complicating their work, especially of small ones, is much to the benefit of their clients and, hence, the public. However, the latter position also has its opponents. Anatoly Volok, president of the Kharkiv Banking Union, told The Day that the movement of any capital is certain to revitalize economic relationships. In his opinion, movement gravitates toward the calmer markets, and since our market is clearer to the Russians, precisely this explains their arrival. Mr. Volok also suspects that the Ukraine- bound Russian capital “has Ukrainian blood in its veins.” He thinks “the pores or honeycomb of the Ukrainian banking system are almost empty, so now they are being filled, because you can count by the fingers of one hand the 100% foreign capital banks and only 29 banks with a foreign-capital stake, while only 156 out of 196 banks of Ukraine have submitted their reports. The system is stagnant.”
Should we in such conditions bow to those who bring their capital to Ukraine? Mr. Volok’s answer to this question is: “We should bow to bona fide taxpayers. But let us see the financial result in the bank reports. It is zero in many well-respected institutions with foreign capital investment. This means they don’t pay even a penny in taxes, saying in defense that they spent what they earned. This is their economic policy.”
To sum up, we should not compare the advent of foreign, including Russian, banks to Ukraine with an armor assault. In terms of investments, these rather look like scouts on low- powered motorbikes, who quite deserve to be welcomed not only by fifth columnists. They should not be feared (even if they are followed by a whole army), but still one must keep an eye on these “long-awaited” guests. This what we should ponder.
