Association of Ukrainian Banks / Press Center

Report regarding Internet-conference of Olexander Suhonyako President of Association of Ukrainian banks, which was held on 18 June in “Interfax-Ukraine” agency and promoted by “Halytski kontakty” business weekly magazine

1. The National bank of Ukraine declares “absolute stableness of hryvnya rate”. Thus the growth of prices of some inflation processes is restricted. Though along with that the price of credit funds rates 18-19% per year. The enterprises have possibility to raise credits in foreign finance establishments in other currencies, US dollars, for example and to disburse taxes on LIBOR + 5…7 or 6 – 7.5% per year. Enterprises especially large ones do not have any economic grounds to be credited in Ukrainian currency. National bank of Ukraine must undertake measures to decrease the cost of credit resources for enterprises. The banking system seems to operate just for the banking system itself and not for the industry of Ukraine. Please comment on this point.

2. About 180 commercial banks operate in Ukraine. Do we need such a number of finance institutions if they cannot compete with even medium banks of developed countries and if the maximum supply of credit funds for Ukrainian enterprises makes up $2-3 million?

Interest rates for hryvnya and for dollar are different that means that hryvnya and dollar is not the same thing. And this means that to date hryvnya as national currency is of less quality than dollar. I stress dollar. It is a common knowledge that there is less trust to hryvnya than to dollar. Why am I ready to deposit dollar for 7% per year and I am not ready to deposit hryvnya foe 7% a year? And I am ready to deposit it for 15-17% or even 18% per year? Because the government that saves and backs dollar is trustworthier than the one that backs hryvmya.

Why is it like that? Mainly because of risks, risks of crediting in hryvnya, which are connected with common things. For example first I would grade borrower’s capacities - half of our enterprises are non-profitable. The second constituent is protection of creditors rights – the credit granted is very hard to get back, there emerges a lot of problems with realizing pledges, problems with court procedures. Here are the constituents that form high interest rate. To my mind attitude of National bank regarding decrease of interest rates and for Volodymir Stelmakh and the present National bank Head Serhiy Tyhipko being in office is being actively promoted.

You see that interest rate for hryvnya credits decrease from 24-25% to 18%. I suppose that this tendency will be preserved. In this event macroeconomic index gives us grounds to state that this tendency will be preserved till the end of the year.

National bank of Ukraine gave order to the banks by 11 July of the current year to close anonymous and coded accounts of individuals in foreign and national currencies. Is not such a measure too critical?

This point is out of our control. In general as I understand the point was removed.
AUB did not receive any propositions as for introducing moratorium or restrictions as for this resolution thus we did not undertake any measures in this direction.

Moreover NBU implements this actions within the framework of the fight with tainted money laundering and pursuant requirements that we support and will implement. NBU position thereto is normal.

Do banks submit information re. payer-individual to tax or other fiscal bodies if it invest an apartment in a project under construction if such investments amounts more than 50 000 Hrn? Thank you.

To date NBU and we do not have any contradictions as for keeping bank secrecy. Keeping bank secrecy is unambiguously recorded in conception of banking system development, which was approved by managerial board of National bank and is presently being approving by President.

The second as for investing 50 thousand Hrn. in apartment, the bank unambiguously does not have any grounds to divulge this information. I can cite you: “information regarding deposits of individuals can be disclosed by a bank on demand of the owner of such information, pursuant a court ruling, to public prosecutor bodies or to MIA”.

The way mass media presents EC actions in this direction is not quite accurate. EC seems not to keep bank secrecy. Though it is about definite deposits in other countries and represents targets of EC position. Banking secrecy was not eliminated.

Here we can turn to another issue connected with tainted money laundering. Banks will make endeavors not to let tainted money be laundered. We have declared this issue in compliance with laws and international treaties. The points that must attract a banker’s attention are clearly set forth therein. There is a corresponding structure that is in charge of this, a person who is responsible for this and who studies the client and clears up the origin of the funds. It is only information regarding “tainted” source that is supplied to Derzhfinmonitoring.

Naval crewing agency “Marin Star”, Mykolayiv. Halina V. Nekrasova, Head; Varoslav V. Burkut, Head of crewing department.

The question reads as follows: our agency renders services to Ukrainian sailors and assists in their employment by foreign vessel owners. The sailor before their departure had opened accounts in Ukrainian banks so to get their salary.

In majority of cases this transaction is required by a vessel owner. Along with that a sailor avoids risk of caring cash. According to the Internet reports tax administration and tax police got access to information regarding accounts of individuals. Thus the notion of “bank secrecy” is tacitly eliminated.

They can undergo taxation twice. All the sailors pay taxes for their salary in the country they are employed with.

The sum kept at a sailor’s account can be disclosed by the tax officials who abuse their powers to criminal structures. If that corresponds to the facts what is the way sailors can protect themselves? Is it worthwhile opening accounts for our sailors abroad? (Working for foreign companies they can definitely do that.)

The information that tax bodies are permitted to access deposits data does not correspond to the fact. It goes without saying that banks take care about their clients and do not divulge information.

Ukraine signed a treaty regarding elimination of double taxation with almost all developed countries thus there must not emerge any problems with double taxation.

We had a set of questions re. introduction of taxation for deposits of individuals in banks coming in force from the beginning of the next year.

Laving taxes from deposit profits was suspended till 1.01. 2005. I suppose that prospectively deposit profits will be due to taxation though we have many grounds to suspend this process.

To mind it is very serious point of national importance. What is AUB? It is union of banks; to date there are 126 members. What is KBU? It is part of the same banks. Here we have a question: can a bank that is a member of two organizations compete with itself? In fact banks can finance two organizations because we operate on complementary basis. AUB presents interests in a system scale and KBU brings lawsuits at particular points. And Association cannot do that pursuant to the law. If it is professionally done the interests of the banks will be well protected. And it is obvious that two persons present one and the same position. If we speak about competition than we can speak only of the one concerning meeting system interests. And such a competition can be present between two individuals and not two organizations.

Speaking about banking system it cannot be presented by for example fifteen organizations. If it is it means that there is no system and there are only its separate parts. It is obvious that the system of commercial banks must be represented by a sole organization. Though simultaneously there can exist great number of specific organizations. For example organization of mortgage banks, region organizations. By the way KBU is AUB member and it is natural that head does not compete with hand. Nevertheless on the other hand existence of present day union with its business methods make us be fit. And there’s something positive in it.

Does the Association entrusted to you have as its objective to propagate and establish the best principles of corporative management for bank institutions along with reliability, loyalty and business partnership being their statutory objectives?

If it does than what actions can or is the Association intending to undertake in respect to “Stolichny” joint-stock commercial bank, which completely ignores such principles and has wallowed in notorious scandals, complaints and suits; which initiated a big two-year conflict with prospective share holder not registering the latter and returning no money for the sold blocking parcel of shares what cannot help affecting the image of the Association itself?

It goes without saying that we support the process of establishing the best principles of corporative management in activity of commercial banks. Though our Charter does not allow the Association to influence this process. Moreover the article 13 of the Law of Ukraine “Regarding banks and banking activity” forbids associations to interfere into any issues of bank activity.

Today Serhiy Tyhipko NBU Head said that controlling parcel of shares of Crediting Bureau would belong to the banks. According to him they will deal only with the first ten applicants.

Today it is hard to speak about definite forms of Crediting Bureau for we have not yet cleared up its functions. At present there is a structure that gathers information about bed credit raisers – 101 banks. We don not get full information, there is something that we get and there is something that we do not get. If the information is not checked or complete we cannot work. Till the milestone that prevents banks from giving full information exists we cannot speak about bureau operating in its full capacity. Along with that we can wait for an opportunity to make the structure operate both for legal entities and individuals and we can make in an evolutional way – to steadily work out technologies. For example if the situation shows transparency of the market (and it tends thereto) than we’ll spread the material gained.

It will obviously be of non-governmental nature and we’ll go on considering its form. And it is clear that we first need 10 banks. What’s next?

Recently the court answered to a claim of State Security Service (SSS) against AUB. What’s the end of the story?

According to the court ruling we are obliged to make apologies to State Security Service. Though to date we haven’t got the court’s decision in writing. We are accused for having insulted abused honor and dignity of SSS while discussing “whether or not it can double price rates”. What’s the other point we are accused in? Allegedly the Association forced the banks not to conclude contracts with SSS. How can you imagine that? We as organization are dependent from banks, we follow their conditions and we forced them not to conclude contracts? To my mind it sounds ridiculous and absurd… Moreover they refer to the letter compiled more than a year ago and which has no legal effect.

Another accusation reads as follows: AUB has engaged a political party, which forced Antimonopoly committee to initiate antimonopoly investigation and due to such investigation SSS was declared to represent a monopoly in 6-8 oblast.

The third. AUB forced NBU to forward a bill in compliance to which banks have a right to employ their own security service. At present this document is being considered in Verkhovna Rada. That is the list of accusations.

It is obvious that we will reclaim. I suppose it concerns not only AUB. It is the matter of principle for us. We cannot fail in this suit for it represents a state concern. And we managed to calm the monopolist a bit down. It was this year that SSS has not raised price rates since the whole period of its existence. We hope having restarted the court procedure to let the truth come forth.