Don’t panic, say bankers
Advice comes too late. Over six billion hryvnias withdrawn from Ukrainian banks in past two weeks
Ukrainians have withdrawn everything from their bank accounts, believing that the best place for a handful of hryvnias is a three-liter glass jar or under the mattress. Those who have a more modern approach have installed compact safes in their apartments. Is this the correct approach?
The panic in the Ukrainian banking sphere has caused certain banks to reduce one-time bank withdrawals to 200 hryvnias, payable in 10-hryvnia banknotes. Yet these drastic measures did not prevent alarmed citizens from forming endless lineups day and night in front of those much-cursed ATMs.
Desperate bankers can only offer standard phrases to reassure their frightened customers. Will this help improve the situation?
“We are certain that our bank will soon return to its normal functioning mode. But this mostly depends on people. The panic was triggered by information spread by the press, so banks will return to normal once people stop withdrawing cash from their accounts. We officially state that everything is normal at our bank, and this panic must be stopped so that we can resume working normally,” The Day was told by Prominvestbank’s press service. This bank was the first to fall prey to the ATM cash withdrawal panic.
But the average Ukrainian family agrees more with Motia, a cleaning woman at a nearby savings bank, who said that “everything that you hear on the radio, see on television, or read in the media is a bunch of lies.” As a result of such economic incompetence and mismanagement, both banks and their clients are suffering. Depositors, for example, panicked and emptied their accounts, losing their accumulated interest.
On Oct. 13 the National Bank of Ukraine forbade banks to allow a run on them. Experts believe that this measure will finally stop the panic and prevent the banks from being bled dry. Some people have a completely different view, while others are threatening to sue the regulatory authorities if their right to withdraw all their money from their accounts is not honored.
The Day asked some lawyers whether this attempt to calm down the situation will result in months of court hearings. Roman Marchenko, a senior partner at Illiashev & Partners, says that the NBU ban is “an absolutely illegal document...and this is not the first time that the NBU has done this. A similar document was issued in 2004, which led to a large number of lawsuits that finally proved that banking clients and legal entities that had accounts in Ukraine were right...I think that in this particular case the NBU is deliberately acting contrary to the law in order to stop the panic. After all, a lawsuit will take some five months, time enough for the panic to abate, as everyone hopes.”
Marchenko says that this will undermine people’s confidence not only in banks but the whole system. “But in this case, the NBU is trying to save the banking system, not people’s confidence in it. Otherwise, there will be nobody to show this confidence or the lack of it. Now our banks have a chance to survive. Without this step, they would have had no other choice but to declare bankruptcy.”
Valerii Lytvytsky, head of the NBU’s board of experts, told The Day, “We have just been shown another example of what careless words can result in. Ukraine is far from being the only example. We have been repeating the same mistake for years. Our banking system is sound. The banks that have suffered from this problem will soon get back to normal. The NBU won’t let anyone rock the banking system’s boat.”
Lytvytsky believes that, in order to restore people’s confidence in Ukrainian banks, it is necessary to work more with their internal resources and rely less on outside loans: “We have to focus on our Ukrainian borrowers. Our banks must rely more on giving loans to the real economic sector rather than heating up consumer crediting. We have to work on boosting the population’s interest in putting their savings in Ukrainian banks so that they will have crediting resources and not have to rely so much on the unpredictable situation with external loan markets.”
The NBU’s experts believe that 90 percent of the panic was caused by a psychological factor. In future, it would be best to disregard hearsay concerning such serious matters.
