Banking is one of the strongest security tools. Even if a financial institution goes bankrupt, Ukrainians can return their investments through the Deposit Guarantee Fund.
How it happens – in an interview on Channel 24said Svetlana Rekrut, Managing Director of the Deposit Guarantee Fund for individuals.
Before the full-scale war, Ukrainians did not have many tools to store money: people either kept dollars under their pillows or invested money in real estate, or put on deposit. What is the situation now and should we trust the banks?
Now Ukrainians should take care not only about profitability, but also about the safety of savings. For the third year in a row, we have seen an increase in the deposit base. And with the outbreak of a full-scale war, it began to grow even more. The use of a card and non-cash payments during the war proved that it is convenient and safe.
In addition to making people calm about their savings, with the outbreak of a full-scale war, a law was passed at the initiative of the President, according to which the funds of individuals in banks, regardless of whether it is a deposit or an account balance (a pension or a student card), it is 100% guaranteed by the state through the Deposit Guarantee Fund.
Is it 100% any amount or is it a specific amount?
This is absolutely any amount, including accrued interest. That is, if you have 500 hryvnias on a deposit, or a million hryvnias, all of a sudden, if the bank “bursts”, your funds will be returned to you in full plus accrued interest.
That is, the state guarantees that a Ukrainian can withdraw his money from a bankrupt bank?
Quite right. You know, Ukrainians should not worry at all now whether a bank will go bankrupt or not. People can be sure that 100% of the funds will be returned to them under any circumstances.
Since 2012, more than 2 million Ukrainians have experienced this because they were clients of banks that eventually went into liquidation. However, they have seen in practice that the Deposit Guarantee Fund returns the funds. In addition, it does this in a convenient way – through an automated payment system, to which 12 banks are connected. The depositor can choose from the available list the bank and branch where to receive the funds.
With the outbreak of hostilities, we also launched an online payment tool. That is, if the depositor does not have the opportunity to go to the bank and receive the funds due to him, or, for example, went abroad in search of refuge from the war, guaranteed payments can be received remotely, directly from home, from his apartment. This option is currently provided by 4 banks.
The depositor can receive funds on the card directly from home/Photo Unsplash
Many banks have gone bankrupt since February 24?
Since the beginning of a full-scale war in Ukraine, 4 banks have been withdrawn from the market. Two of them had Russian capital, and they did not so much go bankrupt as were liquidated due to the political component, the actual armed aggression. At the same time, 2 financial institutions were declared insolvent and, by the way, their depositors are already covered by the 100% guarantee rule. People were able to make sure that this system works, everything happens as it is written in the law.
Perhaps, all Ukrainians are wondering: where does the Deposit Guarantee Fund get the money to return people? After all, we are talking about billions of hryvnias.
What is the Guarantee Fund? It works like an insurance company. In our case, banks operating in the market make contributions to the Guarantee Fund. And if the bank goes bankrupt, this is considered an insured event and the Guarantee Fund compensates depositors – individuals, including private entrepreneurs (FOPs), funds.
Before the full-scale war, the guaranteed amount was limited and amounted to 200 thousand hryvnia per depositor in one bank. With the start of a full-scale Russian invasion, this amount is not limited. The rule of full guarantees will be in force during martial law and three months after it ends. After that, the guaranteed amount will be limited again, and it will already amount to 600 thousand hryvnia.
Can the Deposit Guarantee Fund itself go bankrupt?
No, that cannot happen. If the funds accumulated by the guarantee system are not enough, the Fund, in accordance with the law, can apply to the state for additional funding and receive a loan.
This situation was in 2014-2015, when almost 100 banks went bankrupt. At that time, we paid almost 100 billion hryvnias to about 2 million depositors, including through funds received on loans from the state. But the Fund paid all depositors absolutely everything to the last penny.
Bankrupt banks pass into your subordination, in particular, their property. What do you do with all these assets?
We sell them. There is such a sales system ProZorro. Sales. This is an online auction, where everyone can watch the auctions in real time.
But what are bank assets? Perhaps your next question will be (smiles).This, of course, is real estate, if it was on the balance sheet of the bank, cars, chairs, tables, and so on, but the vast majority are loans. After all, what does a bank do? He borrows from some, attracts funds for deposits, and gives loans to others – to people, businesses, and also has interbank loans.
And, in fact, when a bank enters the Guarantee Fund for management, almost always 80% of it balance – loans that we need to repay from debtors, or sell them.
If we are talking about Russian banks, then quite a lot of assets were in real estate. This is more than 400 objects. One of these banks had a strategy to accumulate this property, they took it from borrowers and kept it on the balance sheet. And now we are in a fairly active stage of selling these assets.
And what about those clients who had a loan from a bankrupt bank? Where do they go to repay the loan?
Nothing changes for the client in the event of bank failure: his loan agreement is valid until full execution. The funds that the client will give on the loan will be returned to those who put money on deposit.
Loans must be paid even after the bank goes bankrupt/Photo by Unsplash
Credit payments are accepted at the cash desk of any bank, in the same way as under normal conditions. Current details can always be found on the website of the bank or the Fund. Therefore, everything here is as convenient as possible for the client.
Ukrainians may be afraid that their loans will be sold, and collectors may come and, for example, take away an apartment that was entered on bail. Can this happen?
The sale of a loan is already a measure of last resort. First, we will ask you to repay this loan according to the schedule specified in the contract. Not premature.
Then, if you cannot pay the loan, do not return the funds, we will offer a restructuring. The terms of the restructuring are very loyal.
That is, we will do everything to:
- the client did not go into “delay”,
- so that the loan was “live”.
But if the client refuses to pay, does not agree to restructuring and ignores the bank, of course, we have no choice but to sell these loans. But after all the measures that the Fund proposed, I think that this is a fairly honest position.
What measures were taken by the Fund to stimulate payments and facilitate the procedure for those who have lost their main source income?
The Guarantee Fund is trying to create the most favorable conditions for restructuring. In addition, after the start of a full-scale war, credit holidays were introduced for borrowers of banks that are being liquidated.
As for legal entities, here we notice the know-how associated with the war. If earlier legal entities willingly went into default, now clients are trying to make at least the minimum payments under loan agreements.
Why is that? First of all, they take care of their credit history. The second factor is the realization that this is our country, and we must do everything to make it good here. I am convinced that this is proof that businesses believe in Ukraine, and this behavior is the only reason for this.
How many electronic auctions for the sale of liquidated bank assets were conducted by the Guarantee Fund in 2022 ? How much did you manage to gain?
Since the beginning of the war, we have sold assets worth about one and a half billion hryvnias. And these are quite good indicators, in particular, in terms of the effectiveness of auctions.
After the opening of state registries in the summer, we held about 900 auctions. About 20% of them are successful. The proceeds from the sale are used to pay bank creditors.
Everyone can participate in online auctions/Photo by Unsplash
Is there a threat to the banking system today?
During the war, we cannot say that there are no risks. However, everything will depend on when we win, as well as on the stability of business and the economy.
Now we see that the banking sector is quite stable. This is primarily due to the margin of safety from the past and the reform of the system in 2014-2015. Banks have been quite actively accumulating their capital all these years, and now they actually operate on it.
Of course, we cannot say that we do not expect bankruptcies. But here it is more important what tools the state has in order to minimize possible negative consequences for people and business.
Ukrainians are thinking about the solvency of the state. We all hear about the hole in the budget, about loans from abroad, but will our allies have enough margin of safety to help us further?
You understand that this is strategic assistance . This is not only our war. This is a war for democratic peace. And the allies understand that the country must stand. So we don't need to think now that the help will run out. Naturally, it will be enough.
Besides, Ukrainian business still works. And a significant part of budget revenues is generated from Ukraine.
Yes, we all realize that next year will be difficult. We all hear forecasts for a fall in GDP. We all understand this. And this means that the state is preparing for this. Therefore, we will definitely resist, go through the next year and meet the victory.
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