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Between us, the bankers: closing the page of the "old" bank (full text)


The hands of bankers are tied by limitations imposed by the NBU and sky-high interest rates. Given the circumstances, is there any way that the system can develop?

The dialogue between Mauro Maschio and Philippe Dumel continues.

Banks faced a problem of hyper liquidity, on accounts there are more than UAH 45 bill. Why are you not giving credits?

Mauro Maschio: The main cause of liquidity oversupply is low credit demand. Nowadays there is a very low demand on new credits for new investments. Now main banks activity is to support companies that took credits in past and to help them when the situation becoming worth because of low liquidity, prices, bad market conditions. I saw only two cases when clients asked new credits for new projects. 

Partly volumes of credits are limited by liquidity. Now it is not so easy and cheap to get liquidity for credits. It is not a problem of banking system but economy in general. People save their money in different places because they are afraid of restrictions for assets transferring and devaluation of national currency. In such conditions savings are not available on financial market. But as I already told you even banks that have liquidity don’t have possibility to give credits.

Even if there is demand on credits in UAH current interest rates won’t be acceptable for business.

Philippe Dumel: Obviously that 25% interest rate in UAH is very high. In long and medium term forecast we can say that such interest rate is very heavy. It can be used only as an exception for a short period of time and then bank will have to come to more available interest rate. But in current situation… We can say that bank is not a charitable organization that is why we need to accept current market conditions. As soon as market drops down to more usual for normal economy interest rates we will propose more profitable conditions. 

Mauro Maschio: Company that takes a credit with interest rate 25% must have profitability more than 35-40%. I don’t think that there is a normal business that brings such profitability. We will decrease interest rate when inflation drops and market recovers.

So problem of hyper liquidity will be solved and credit activity will be active when interest rates decrease?

Mauro Maschio: Main cause of hyper liquidity is not in interest rate but in economy situation. Today even if credit interest rate is 5% entrepreneurs won’t invest because they will be worried about the situation that can happen in future. E.g., in Italy interest rate is quite low. But demand is very low too, because there is no confidence in future. When Ukrainian economy recovers, people will bring back money to banks and this will decrease deposit interest rated and properly credits` interest rates. Then clients and companies would like to invest and develop and for this they will be able to use credits.

Philippe Dumel: This is a question of demand and supply. Demand is still not so high. But in the next year in economic forecast about recovering will be right demand will increase. Concerning supply in order to retain crediting there should be three main elements - appetite for risk, liquidity and capital adequacy. For performing the element of capital adequacy, NBU have already started program on diagnosing the biggest banks and stress- testing in order to evaluate the necessarily of additional capitalization. Indication of liquidity changes according to institute but in general it came back to high level in this sector. But appetite for risk is still limited. Banks don’t have still enough signals which will help them to recover appetite for risk. One of examples of such lack of signals is the protection of creditors' rights. Banks` diffidence to withdraw collateral automatically influence on their appetite for risk during giving the credit. If moratorium for withdrawing collateral is cancelled it will became a signal that will help to recover credit activity. Because for us it will be easier to explain securities company that the situation in Ukraine has changed.

To read the full text of the interview click here

Date: 07.09.2015


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