Temporary administration of the Depositors Insurance Fund is a sentence for the bank. Experts believe that all financial institutions that has been recognized insolvent this year will not be able to survive.

Last week the NBU has declared that the bank "Ukrainian Financial World", owned by Pavel Klymets, member of the parliament from the Party of Regions of the 5-6 convocation of the Verkhovna Rada and the owner of the financial and industrial group "Olimp" ("Olimp" vodka brand), is insolvent.

This financial institution has become 15th with an introduced temporary administration since the beginning of the year. Earlier it was declared that "Eurogasbank", "Finrostbank", "Starokievskiy bank", "Avtokrazbank", "Zakhidinkombank", "Pivdencombank", "PromEconomBank", "Interbank", "Forum", "Merkuriy", "Brokbiznesbank", "Real Bank", "Daniel" and "Zoloti Vorota" are insolvent.

All of them were connected with the business of the former government representatives one way or another. They were not systemically important for the market and did not perform market functions, except for the "Forum" bank.

According to the procedure, after the introduction of temporary administration, the Depositors Insurance Fund is looking for potential investors who can revitalize the banks. However, as the practice shows, these searches end with no results, and the NBU initiates the process of liquidation.

None of the troubled banks has yet succeeded in finding a suitable investor. There are several reasons for this. Firstly, it is a negative investment climate in the country, which was low even before the war. Now everybody cash in their chips and wait for better times, he explains. Secondly, the level of troubled loans with such banks amounts to 50% and more. Something needs to be done with this, however, only a few banking groups in Ukraine know how to work effectively with troubled assets.

There are cases when the NBU refuses to sell the bank to the former owner. This is what happened to the "Forum" bank. The National Bank was not sure that the "Smart-Holding" will be able to revitalize the bank at the second attempt and Novinskyi was refused. In many cases, previous owners or some interested investors challenge the decision on bank's liquidation, although this does not stop the NBU.

The reason for this is that these financial institutions were more engaged in schemes, rather than in the usual market business.

"It is impossible to provide a quality service or offer some new services without having a good exchange balance and the possibility to invest in technologies. Accordingly, it is impossible to earn money in the traditional way," told FUIB's chairman of the Board, Serhiy Chernenko. "In such circumstances, the question on non-traditional methods of earnings arises. It overloads our banking system. Now this leads primarily to the fact that small banks that did not make trend and made no difference, but created certain risks, are eliminated," summarizes the banker.

In addition, a number of such banks were created as "laundries" for their owner. The fight against conversion centers is one of the priorities of the tax authorities, and the absence of the old "protection racket" first of all bares scheming business of the former government.

According to market experts, up to 10% of the banking market participants were engaged in the conversion operations. Other small banks either collected money and provided services for their financial and industrial group, or were the substitutes of the larger banks. In both cases, they had no operating portfolios.

It is absolutely clear, why the National Bank is not interested in saving such institutions. There is simply nothing to save. This, of course, creates an additional load for the Deposit Insurance Fund, but even total payments for small banks do not exceed the fund expenditures on the deposit compensation for the Brokbiznesbank and "Forum" bank. For example, almost 50 thousand. people have already received payments from the fund for the six months of 2014 and they totaled 3.2 billion UAH. At the same time, the assets of the Fund have increased by more than 700 million UAH since the beginning of the year, up to 8.07 billion UAH. This became possible thanks to the support of the NBU and the the government. In July, the Cabinet of Ministers adopted a decree that enables the provision of the Deposit Insurance Fund with free financial aid in the event of insolvency or when banks, whose share of liabilities to depositors and creditors is more than 2% in the banking system, are excluded from the market. And before that, in June, the NBU has adopted a decision on the provision of the Deposit Insurance Fund with a 4.2 billion UAH loan.

Most of these measures were taken with a view to the future — according to expert estimates, more than 20 banks can also be excluded from the market by the end of the year, and on the basis of the initiative of the Cabinet of Ministers, large financial institutions can also be among them. At least, the NBU is preparing to this case scenario.

It has been earlier voiced that the head of the National Bank has a list of more than 40 banks, at which temporary administration may be introduced, but Valeriya Gontareva refuted the existence of such documents. But the former head of the National Bank, Stepan Kubiv, has definitely had such a list. He has publicly announced this in the press.

"In our country, the number of banks per capita exceeds the normal level. From the standpoint of concentration of banking assets, the basis of the banking system is formed by 20-30 banks. All the rest are either fictitious banks, or banks that have been used in the financial schemes", says Serhiy Chernenko. "Banking business is the business, in which the scale matters. When the number of individuals customers is from one to three million, the possibility to use more sophisticated instruments both in management and in the products appears," explains the banker.

At the same time, not all are willing to accept the loss of their creation, albeit it was not very good, but it took time and money. Therefore, wanting to stay in the business, many owners are trying to convince the NBU not to recognize the bank as insolvent and to introduce a curator to it. This allows shareholders to legally retain control over the financial and credit institution. However, in this case, the bank's management can not make any decisions without the permission of the curator.

"The introduction of temporary administration is not a whim, but the possibility to stop the withdrawal of the capital from the bank. If it can be done with the help of the curator, then why not. What's wrong with allowing the management to save the financial institution on its own?", said the deputy chairman of the board of one of the major banks.

A temporary curator gives the owner and the management of the bank not more than a month to improve the situation. If they fail to do this, the administration is introduced.

"Curators get banks with serious problems and serious patrons. This is a sort of an agreement between the NBU and the bank owner, however, I can not recall a single case where they managed to avoid temporary administration after this," said one of the bankers.

And in the present situation in the country and the absence of investors this is virtually a 99% probability of further liquidation of the financial institution.

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