Decision to Cancel Guarantees on Foreign Currency Deposits in Bankrupt Banks Will First Have Negative Effect – Expert



The reason will be an outflow of foreign currency deposits.

The decision to cancel payment by the state of compensations on foreign currency deposits in bankrupt banks will rather have a negative effect at the initial stage, since it will entail the outflow of foreign currency deposits. At the moment the funds of individuals in foreign currency make up almost 50% of the total amount of household deposits and 20% of all the obligations of the Ukrainian banking system.

This is how Julia Kiryanova, the First Deputy CEO and the CFO of Smart-Holding, commented to UNIAN on the statement of Konstantin Vorushylin, the managing director of the Individual Deposits Guarantee Fund, who considers it right to cancel payments by the state of compensations for foreign currency deposits in bankrupt banks.

"The loss of such a source of foreign currency will affect the ability of banks to carry out lending operations. First of all, the volumes of lending to legal entities that have earnings in foreign currency will decrease. The fact that foreign currency deposits move into the shadow can affect the hryvnia (UAH) exchange rate. The very approach proposed by the Fund is correct, but on condition if some compensators are introduced. It is also important for the Ukrainian economy to show stable growth. Then the level of trust to the national currency will be higher," Ms Kiryanova said.

Meanwhile, Ms Kiryanova considers Vorushylin's initiative to increase a guaranteed compensation on deposits up to UAH 800 thousand as a positive one.

"The initiative to raise the threshold is certainly positive. This will contribute to the build-up and concentration of the deposit mass in the banking system, which, in turn, will broaden lending opportunities. In addition, it is convenient for a depositor who has to open several accounts in different banks with the current compensation threshold," the expert stressed.