Recently, the World Bank allocated Ukraine $ 400 million to develop the financial sector. Director of Ukrainian office of WB, Martin Raiser says that when the National Bank will introduce interim administration in the banks that are unable to withstand the norm of capital adequacy, and explains why the World Bank may refuse to Ukraine in the allocation of the second tranche of the loan.
A year after the bankruptcy of Lehman Brothers, which marked the beginning of the acute phase of the crisis and the beginning of the crisis in Ukraine. How do you think, does have a second wave of economic crisis in the world and Ukraine?
situation in the country, as before, will seriously depend on what happens in the world. Recent signals that feeds the global economy, show that the situation is improving and the markets recovered. Of course, if this trend will be sustained, it will have a positive influence on the situation in Ukraine. But the government should do more to negative news from abroad do not have a serious impact on the local environment.
First of all, we are talking about the conditions for the recapitalization of banks, not only due to the budget, but also by private shareholders. In the near future, commercial banks will feel the gravity of the weight of the distressed debt on its balance sheet, and will be forced doformirovyvat additional reserves, which would need to increase capital. Strategic investors will want to protect their brand and network, and so will be interested in providing additional capital. But they also want to ensure that the rules are the same for all, and regulation is transparent and takes place at arm's length. And, of course, like all investors, they want to see a reliable and consistent macroeconomic policies.
now the official rate of hryvnia, which banks recalculate its currency loan portfolio in the hryvnia for determining capital requirements by 10% below the market rate. And the World Bank and IMF insist that the deviation between market and official rates should not be greater than 2%. In this case, banks' capital requirements will increase dramatically. Why is WB?
One of the conditions of cooperation with the IMF is the transition to a floating rate fixing, in which the NBU should keep the official rate is close to the market and create opportunities for speculation. But now the key issue is to determine the real market price of the currency and the factors that affect this rate. First is a factor of confidence in the financial system - and the level of trust depends on the pursued monetary policy and its correctness.
If the official exchange rate differs from the market, it also affects the credibility of the system. Regarding the requirements for capital adequacy - indeed, we have an agreement with the NBU, which banks should get capital adequacy at 10% at the end of 2009 and if by that date, it does not, apply to banks interventions. We will insist on this approach, because the speedy restoration of stability of the financial sector is impossible without adequately capitalized banking system.
you think the National Bank will achieve a capital adequacy in the system? 15 largest banks at the end of last year promised to NBU to raise capital by June 1, 2009, and has not done so ...
now agreement between the shareholders of banks and National Bank provide that the regulatory capital adequacy will be achieved before the end of this year. If not - the NBU will have to take measures, including the possibility of offending banks in transitional administrations.
However, neither the regulator nor the shareholders of banks are not interested in such a scenario of events.
Why not? NBU is interested in stabilizing the banking system and its adequate capitalization. If the agreement between the National Bank and the World Bank are not met, the World Bank refused to grant another loan for the development of Ukraine (it is the second loan program for promoting the financial sector).
How do you assess the impact of the program to recapitalize the commercial banks? There was whether the monetization of government securities placed in the capital of troubled banks, one of the reasons for the growth of the dollar - in fact withdrawn from customers' deposits to recapitalize the banks are actively guided to purchase?
If we are talking about restoring confidence in the financial sector, the government has no other chance to do it, but to nationalize the troubled banks. In order to control the influence of the process of liquidity, it is necessary to develop clear plans of liquidity for all government to recapitalize banks. In addition, the NBU can use other methods of sterilization for the management of liquidity, such as operations on the open market or issue certificates of deposit.
Do you support the Cabinet's policy of refusing to recapitalize the bank Nadra and Ukrprombank allegedly because of the reluctance to take on the budget of their external debts? What is the problem? After the National Bank monthly sells $ 1 billion IMF loan funds to banks, which put out its external obligations, and foreign currency debt falls on the budget. Thus, in both cases there is a rearrangement of commercial debt to the State.
cooperation program with the IMF has the task to translate the commercial debt in the state. Target IMF - to bring back confidence to the Ukrainian financial system, which resulted in a renewed and the number of foreign loans by foreign creditors. Moreover, the level of extension (roll-over) is quite high, about 75% of the issued loans. This is the reason for improving the situation of balance of payments. It is clear that some lenders willing to leave, and the money the IMF serve bag at such scenarios. I assure you that if the IMF had suspended cooperation with Ukraine, there was a sharp jump in demand for the currency, the hryvnia exchange rate, and could easily fall to two-digit value against the dollar.
And what to do with the bank Nadra and Ukrprombank?
Relatively
Ukrprombank, in principle, agreed to transfer its liabilities and some assets to another bank, rather than recapitalize. The reason why you need to first restructure its external debt, is that if you do not, they become sovereign obligations, and we, in fact, we completely bail out foreign creditors at the expense of taxpayers. Therefore, you should first restructure these debts, and then recapitalize the banks. In the case of private commercial banks when they get access to foreign currency in order to pay on their foreign obligations, they still use their own resources, rather than state. Herein lies the difference.
In theory - yes. In practice - no, because commercial banks were buying from NBU currency mainly at the expense of refinancing.
Refinancing will only bail, so it is protected.
What are the World Bank proposal for what to do with the assets of troubled banks, which fall under the liquidation or reorganization?
Our proposals are reduced to two approaches. The first normal liquidation of troubled banks, in which there is only a problem of filling the Deposit Guarantee Fund for timely payments to investors. NBU now has the opportunity to issue a credit FGVFL to replenish its cash reserves, and this approach can be easily applied. However, this is a long way. Therefore, we offer applied only to the elimination of small, non-system banks.
In relation to the big banks should act in the second approach, which involves transferring the assets of living and secured their liabilities in healthy banks. The transfer of assets may be carried out through auctions: for example, if the bank has deposits amounting to 100 UAH. and assets in the amount of UAH 80., the Ministry of Finance will hold a tender on which interested parties will offer a price for this package of assets. The difference between the maximum price of assets, the proposed purchaser, and the amount transferred him to cover the liabilities of the Ministry of Finance - adding the package of Government Bonds. If the amount of liabilities corresponding to the size of assets, did not have to pay, and the Ministry of Finance wishes to give this package to the bank.
Where will occur auctions these packages of assets and liabilities?
Unfortunately, the trading floor is not, and this - a serious problem. Because the decision on the transfer of assets should be taken very quickly, literally overnight - there is proposal to send packages of assets and liabilities in the so-called bridge bank (Bank of transition). As such, we see one of the most stable state banks, which will carry out operations on the further deployment of healthy assets and liabilities among commercial banks.
And what should be constructed so-called Improved sanitation bank?
In Ukraine there is some confusion between the idea of transition bank (bridge bank), which by law is called the Improved sanitation Bank, and the idea of so-called bad bank (bad bank).
Now I just spoke about the transition bank (bridge bank). We do not recommend the Government to create a bad bank, because the chances of abuse and corruption when dealing with bad assets. Bad
Bank can work in other countries, but Ukraine is a bad idea.
determined whether any deposits will fall into the bags with healthy assets, and which will remain in the bank envelopes to be dismantled? Will there be so that the healthy banks would be transferred only guaranteed deposits up to 150 thousand UAH. And the larger deposits will be refunded only after the liquidation procedure?
This will be the government's decision in each case. But since the problem of the budget - to overcome the crisis with minimal losses, it is not excluded.
World Bank loans
February 19, 2009 The World Bank (WB) announced its readiness to allocate over the next 12 months to $ 750 million to recapitalize the Ukrainian banks and about $ 1 billion for investment in infrastructure. This direct support of the state budget (as has already happened with WB loans) then it did not come.
March 23 the World Bank signed an agreement with the Ukrainian government, the European Commission, the European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB), a joint declaration on the basis of an international donor conference on the modernization of the Ukrainian gas transport system.
April 7 the World Bank decided to grant Ukraine a loan of $ 400 million for 30 years with a five-year grace period within the project Improvement of roads and traffic safety. $ 300 million will be allocated for the reconstruction of the road M-03 Kyiv - Kharkiv Dovzhansky from Boryspil to Lubno, $ 100 million - to improve transport and operating condition of roads of national importance to emergency hazardous locations.
April 27 World Bank Managing Director Ngozi Okonjo-Iweala said the World Bank is ready to increase the scope of cooperation with Ukraine.
September 17 The World Bank has approved the allocation of Ukraine $ 400 million first tranche of the rehabilitation program of the financial sector. Credit will be granted for 30 years with a five-year grace period.
Results from 1992 World Bank approved a loan Ukraine 38, and four grants totaling $ 6.1 billion is about one third of all financial resources provided to Ukraine by international financial organizations.
Martin Raiser - a citizen of Germany, World Bank Director for Ukraine, Belarus and Moldova. Working in Kiev. Prior to his arrival in Kiev served as head of the WB in Uzbekistan (2003-2006 gg.). Previously worked as Director of Strategy and intelligence EBRD (2002-2003 gg.), Was editor of the annual report on the transition the EBRD. He has a doctorate in economic science from the University of Kiel (Germany, 1992-1996.), And a Masters in Development Economics, received the London School of Economics (1991-1992).. Widely published in scientific journals on topics on the international economy, microfinance funds and the problems of transitional economies. 41 years old, married, has four children.
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