KYIV, July 25 – The Association of Ukrainian Banks (AUB) believes that the National Bank’s policy toward commercial banks is becoming increasingly inflexible and destructive, AUB president, Oleksandr Suhoniako, said.
According to Suhoniako, a special AUB board examining the actions of the NBU’s new management arrived at this conclusion at its end of June meeting. “Unfortunately, this conclusion is not comforting,” said Suhoniako.
In particular, he pointed to the National Bank’s increased pressure on commercial banks to raise their capitalization. In the AUB’s opinion, this is causing healthy small banks to disappear from the market and creating additional difficulties for banks trying to raise their capital.
Suhoniako also noted the National Bank’s pressure on commercial banks to force them to capitalize profits, which reduces the investment attractiveness of banks even further.
“If all profits are capitalized, then there is no point in shareholders investing money into the bank’s capital. Currently, the level of the absurd regarding capitalization has reached the limit,” said Suhoniako.
Suhoniako added that the National Bank’s decisions on regulating banks have also declined in quality. He noted that the new NBU leadership has ceased discussing them beforehand with the AUB, which represents commercial banks interests, as it did during Viktor Yuschenko’s tenure.
“In this half year, the NBU’s earlier decisions are being disavowed,” said Suhoniako.
As an example, he cited the new NBU requirements for capitalization of banks’ statutory funds, approved this year, which foresee the freezing of these funds in the National Bank.
He also cited the decision to include substandard credits as negative assets, which decreases capital.
AUB vice-president Antonina Palarmachuk said that largely because of this, the Association supports the requirement in the President’s decree on the creation of a banking oversight body independent of the National Bank. According to Palarmachuk, such a body could protect banks from the destructive decisions of power, including the National Bank.
