The initiative to increase the guaranteed amount of reimbursement of bank deposits is long overdue. For a long time, the state guaranteed the return of only 200 thousand. hryvnia and could not reach an increase in the amount of compensation to the planned first 400, and then 600 thousand. UAH. One of the most significant reasons for these delays in the increase was the financial problems of the Deposit Guarantee Fund (DGF). Therefore, when it was decided not only to increase the amount of payments, but also to guarantee all 100% of the deposits of the population, the very first question that arose for us was: will the DGF have enough money for this initiative, and will it drive it into even greater financial problems?
How will the deposit refund system work
If during the period of martial law and three months from the moment of its termination, any of the banks is withdrawn from the market, the DGF will reimburse each of its depositors the full amount of the deposit, including interest accrued at the end of the day preceding the day the procedure for withdrawing the bank from the market began. That is, the state guarantees the citizen the return of the entire amount of the deposit if his bank goes bankrupt during martial law and three months after its completion.. And three months after the end of martial law, the guaranteed amount of compensation for deposits in Ukraine will be 600 thousand. UAH.
In fact, most likely, we will not need such generosity from the state.. The banking system is now really stable, and its regulator has used all the fuses so that it survives during this difficult time..
In early 2022, military-political tensions caused a moderate outflow of household deposits. However, it is already obvious that banks have calmly met this challenge, having a significant reserve of liquidity.. Since term funds were stable, financial institutions even hardly raised deposit rates, since they did not have to compete additionally for customers..
It is clear that in the face of further uncertainty, banks will need to more carefully control their risks.. And the NBU persistently advises them to soberly assess their own ability to cover with existing high-quality liquid assets not only a possible significant outflow of funds, but also further activities.. But we sincerely hope that there are no those in our banking sector who would not have come to this opinion even without the advice of the regulator..
On the other hand, we hope that banking supervision during the period of 100% deposit guarantees will be many times more thorough, because memories of the period of “pocket” banks, from which their owners managed to withdraw funds imperceptibly for the NBU, and then just as imperceptibly, but already. And there is no certainty that in difficult wartime supervision has become more vigilant than usual, although, given the 100% guarantee, we are talking about very large sums.
In general, 100% guarantees, according to the DGF, now fall under UAH 831 billion of deposits. For comparison, at the time when the guarantee was 200 thousand. , it was about UAH 245 billion.
Are there funds for this?
In fact, DGF is an important element in maintaining public confidence in the banking system, which now more than ever needs customer loyalty..
The principle is simple: banks operating in the market pay contributions to the Fund, and if one of the banks stops working, the Fund settles accounts with its depositors from this money. And in general, the system works without failures, but during the period of cleansing the banking sector, when 94 banks left the market at once, the Fund found itself in a very difficult situation.. The volume of payments that had to be returned to depositors amounted to about UAH 88 billion, and the DGF had a little more than 7 billion of its own funds.. Then the Ministry of Finance and the NBU came to his aid, but not with gifts, but with loans, and at rather immodest interest rates (from 10 to 12.5% \u200b\u200bper annum). And every time the Fund returned to depositors of bankrupt banks their hard-earned money, he got into debt more and more. He returned what he could, even fully paid off to the NBU, but the debt to the Ministry of Finance of UAH 145 billion, together with interest, was simply impossible to return. In 2019, the issue of debt came to a head, because the financial insolvency of the DGF is a very alarming signal for the banking sector. Then the problem was solved simply and at the same time difficult - they provided the Fund with " And what to do then, and did not decide. Nevertheless, the need for sources to cover these debts was obvious, so from time to time this issue was raised in the expert community.. Since how can something be guaranteed if the guarantor is bankrupt?
Well, here the solution was found. According to the adopted legislative changes, as a result, the restructuring of the balances of the Fund's debt obligations that arose in the crisis years of 2014–2016 to the state is envisaged. In this case, we are talking about restructuring, and not about writing off debt..
According to the DGF, according to the terms of the restructuring, the amount of outstanding debt to the state, which the Fund must pay until 2031, is divided into two parts.
The first part - the nominal amount of the received outstanding loan in the amount of UAH 45.7 billion - will be paid at the expense of the Fund's funds as they accumulate.
The second part of the debt - the amount of interest that would have been accrued on the Fund's loan until 2031 in the amount of UAH 62.5 billion - will be paid from the funds that will go to the Fund as a repayment of the debt of insolvent banks that went bankrupt in 2014-2017. First of all, we are talking about the funds that will be collected from persons connected with banks and other persons whose actions or inaction have led to the infliction of losses on banks incompatible with life.. Recall that the corresponding program for the recovery of losses inflicted on the banking sector from the former owners of banks is Ukraine's obligation to the IMF.. And linking the solution of the debt problems of the DGF to the success of this initiative is a good incentive for the Fund to take active steps in the process of recovering the losses incurred.
Neither the increase in the amount of the guarantee nor the restructuring of the Fund's debts will harm the banks participating in the deposit guarantee system.. The Fund does not plan to revise the amount and procedure for settlements and payment by participating banks of their regular contributions. The position of the Fund is clear and understandable: maintaining the financial stability of the banking system is incompatible with the additional financial burden on banks during the crisis period.
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