Banks & Money – Ukraine

March 31, 2009

Well coming up is a surprising statistic……at least if you live outside Ukraine……or Russia, as it was the same when I lived there……relating to money and banks.

Now, I am not going to witter on about the global financial crisis, although my views and remedies would probably be no worse than those who claim to know what they are doing…….but will blog a little about why the Ukrainian banks……all of them……are appealing for people to put their money back into the banks.


Before we go any further, I feel it appropriate to toss you a very quick and in no way detailed history of banking in these here parts over the past 20 years…..relating to why people are not so trusting of the banks.  This has absolutely nothing to do with the current crisis……..we will come to that.

Firstly, let us look at the 1990’s……..the period when the USSR collapsed and re-emerged as a number of independent sovereign States.

In the early 1990’s…..1991 I think…..but can’t be bothered to check…..Sberbank collapsed together with the USSR.  But it’s only one bank, I hear you say.  Very true…..but throughout the whole of the USSR, there was only one bank, and that was Sberbank……..no, I’m not kidding, it was a 100% monopoly.

Everybody lost absolutely everything they had in the bank…..every single Kopek of it.  Ukraine, even now, in 2008/09, has only just started to implement any form of compensation to those who lost money nearly 2 decades ago……..and so far have coughed up a staggering 200 UAH……about $25 per account thus far……which of course is an absolute insult.

Anyway, this inevitably led to the Private Sector moving into Russia from both within Russia and the international community……for the following to happen…… 

In September 1998, without any warning whatsoever to it’s people, the Russian Ruble was devalued overnight by Russia…….causing the loss in value of savings of 95%.

What, you think I’m joking?

My good lady wife had the equivalent of $50,700 in a bank account in Russia the day before the unannounced revaluation……..the following day it was worth $3000……….. Oh yes, she was very pissed off!!!


So, now you have a massive population in Russia and Ukraine, who have not only been bitten once…..but for many, twice over the period of the last 20 years…….bringing us up to the situation today.

Now, thus far, there has not been a bank collapse in Ukraine since the financial crisis started…..although that is not to say it will not happen…..even if unlikely. 

What do you mean it is unlikely?

Well, the majority of the High Street names are subsidiaries of major western banks these days……and to gain entry into Ukraine by buying the existing banks here will not have been a cheap process……by any means.  Therefore to withdraw completely from Ukraine will make it very costly to return…..and have to pay those “administrative fees” all over again.

Add to this not being present here, with the Ukrainian court system as it is, there will be next to no chance to recover any loans already made to either company or individual who cannot pay…..for whatever reason…..as it will be a case of “out of sight = out of mind”.

Confidence in the state of the “western bank” which allows it’s Ukrainian subsidiary to go to the wall, at this moment in time, would probably mean a run on the shares of the parent company back in the “West” too…..having both financial and political overtones as the European government of whichever bank would more than likely part-nationalise or have to completely nationalise that bank…..to stop a run on their other national banks……at a cost to it’s taxpayers……who are all, already very pissed off.


Nicely tangled web eh?

So, anyway, the Russian and Ukrainian people have got used to putting wall safes, floor safes and industrial sized safes…….. the likes of which “Gentle Johnny” Ramensky, who was an infamous Scottish safe-cracker, would have spent more than a few minutes trying to open……in the apartments, houses and offices.

This is not just to keep their money in……here the deeds to your apartment, house, office et al, are held by you and not your lawyer if you fully own them, as many people do……so hence the need for the safe……even if you have very little actual cash!!!

Of course, if you have cash and have a safe……given the banking history of this region and the current global situation……you are very likely to put your cash in your own safe and not risk it in a bank, even if it is one which is not going to collapse, at least until global confidence in banking has returned.


Add to this……despite Ukrainian banks offering some outstanding interest rates….. 7% on the Euro, 12% on the US$ and 18% on the Ukrainian UAH, if you will lock it into an account for 6 months or more which you will not touch…..the Ukrainian government has decreed you cannot access your money early, whatever the reason for needing it, until your 6, 12, 18 month agreement on that account is fulfilled……in an effort to keep the cash in the banking system.

What?…..Yes, I completely agree…….now is the time to be a supplier of wall, floor and Fort Knox style safes in Ukraine!!!

So, what was the statistic I mentioned at the start of this blog?

I’m glad you reminded me……I do tend to stray a little, sorry…….well, yesterday Oleksandr Suhonaiko, from the Association of Ukrainian Banks, appealed to the Ukrainian public to put their money into the banks……as it would remove the need for loans from the IMF, World Bank, EBRD…..and anyone else who will lend money to Ukraine.

F*ck me!!!……I know that’s what you’re thinking, how much personal cash is held in peoples homes throughout Ukraine then because those international banks have loaned, or will loan a lot of money.

Well, strap yourself in………held in the homes of the Ukrainian people, in cash, is…………

60 Billion US$……..yes, that’s $60,000,000,000…… in cash, hidden under the mattress.


What?……Bollocks?……Here’s the press release…….


Told you………and yes, mine is in a safe at the moment too!!!

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