Pekapitalizatsiya failed banks - the path to nowhere!

During the crisis in Ukraine, a new segment of the banking sector - banks with a temporary problem the Administration. Through their recapitalization Government expects to return to public confidence in the banking system, have been authorized to do so for about 10 bln., With an overall limit agreed with the IMF, related cost - 44 billion UAH. The state capital is Ukrgasbank at 84.2% and invests 3.2 bln. Rodovid the Bank - at 99,97% (2,8 bln.), The bank Kiev - at 99.93% (3.56 bln.). But this hryvna taxpayers, that is, we with you!

question is not whether, to what amount should include the state in a problem bank, and what would be the number of these banks. Question - should the State do in the world financial crisis, the taxpayers' money to support the banks bankrupt?

Let's try to deal with problem banks in Ukraine and look at the situation with problem banks in the United States.

Better horrible end than horror without end

So, since the beginning of the crisis in Ukraine, the NBU has started the procedure for liquidation of a bank. This happened in May, with the bank Black (Dnipropetrovsk). Total with a cohort of 15 banks with a transitional administration!

Which banks entered Provisional Authority? In those who stopped the payment of obligations not to return deposits to their expiry date, do not pay interest, do not make payments, that is, banks are bankrupt!

that such an assessment - is not an exaggeration, according to data by international rating agencies. For example, Rodovid Bank in mid-February 2009 has received from Fitch Ratings downgrading the rating to D, which means the default of the Bank of all obligations! This rating is not assigned in the future, but the fact of default. It was the worst among all the estimated Fitch Ratings Banks of the CIS countries. It would seem, here it is, the first bank failure! But no, not here it was. NBU has introduced Rodovid Provisional Authority and frozen pokoynichka.

This slogan, which is trying to recapitalize the banks problem - to restore public confidence! Heard about it just amazing!

Prime Minister blamed the problem of embezzlement of bank refinancing and currency speculation. And that a formal investigation, the guilty punished? But appeals by the Government to pensioners to transfer their accounts of the problem banks in the state? No, the calls are correct, but can we rely upon such appeals to restore confidence in the troubled banks through recapitalization?

This story with restoring confidence does not end there. Vice-President of the Security Service Valery Horoshkovsky states to press that on the facts of violations of the banks with the interim administration prosecuted. Part of it comes to currency speculation, other - on the withdrawal of currency in Offshore. Many of the violations identified by the Security Service, are related to abuses by officials of banks, managers.

All these external factors, leaving no hope for recovery of problem banks. But there are also internal factors that put a cross on the idea of resuscitation banks bankrupt. Any bank can operate only if there is a constant resource base. Where did recapitalize the banks, this base will be taken? The money that the government wants to send to fill their capital, enough for a couple of months of work. And then?

Limits on Interbank of these problem banks are closed, and open them, no one is going. The population served by these banks will not go, but they are rekapitaliziruy - badly burned. There are yurlitsa, businesses and organizations. It is worth to recall information about the NBU outflow of deposits from the banking system in the first quarter of 2009. Increasing outflow of funds is legal persons! The economy goes into the shadows, but those who in the world, drying up capital that does not expect to recapitalize the banks supported by the real economy.

And, what about management? Maybe, the government prepared a team of professionals, who will recapitalize the banks? Do not forget that the temporary administrators in problem banks are almost in the singular, and 99% of management and the Top - this is exactly the type of characters that bring these banks into bankruptcy, rashitili NBU refinancing and waiting when they will have rashitit and budget.

The security of banks and the internal audit service compromised cooperation with the leadership, which went bankrupt, these banks and separate the pockets of NBU refinancing. Their employees were hired to work with managers of banks that are now de jure excluded from the provisional administrator of, and in fact continue to operate.

Consider an example with the bank Black. During the period from 2 February to 25 May here worked temporary administrator Yuri Shevtsov. In May, Yury Shevtsov finally decided to voice in the press condition of the bank and its prospects for recovery. It turns out that 92% of bank credit (255 mln.) - Problem! They provided 14 farms, three of which have already declared bankruptcy court! Even the assessment when issuing loans, these businesses were all assets of 60 mln. But it is in the issuance of, and what to say now that in times of crisis, when worn close to the value of agricultural machinery to the price of scrap metal!

According to Yu Shevtsova, assets in these enterprises will reach no more than 10-20 million UAH. Match the amount of 255 mln and 20 mln. - And immediately you'll see: in front of us - a classic example of bank-bankrupt!

To understand this simple truth, the NBU took four whole months! And all these four months, all employees of the bank, including those who designed and issued these loans, duly received a salary in the bank! And it was not fair to send the money to repay debts to the depositors? And really took the entire four months to deal with 14 of the debtor, three of which are bankrupt by a court decision?

Thus, instead of the operational and legal bankruptcy of the bank in February 2009, we have a situation with an additional theft of money savers! But bank Black - is almost the smallest of the current 15 problem banks.

most interesting thing is that the problem banks at the end of 2008 have already received considerable amounts of NBU refinancing, a mortgage of its funds and assets. That is all that can be realized in real life already, and so belongs to the state! Help if these banks an infusion of cash from NBU? Judging by their current state - no! Investigated the disappearance of billions of refinancing? No, not carried out! So why the Government and NBU believe that the next portion of the budget money sent to an already owned, in fact, the State banks of concern that a fix?

All this comes against the backdrop of a permanent reduction of equity capital the banking system of Ukraine. Thus, according to the NBU, as of April 1, 2009, equity capital of banks amounted to 124.5 bln. and decreased compared to February 2 bln.

According to Sergei Tigipko, the banking system of Ukraine should be rigidly control of the state. The banker also believes that helping is not a system to banks and banks with healthy assets, regardless of their size. Inefficient and pointless to invest in several large, but razvorovannyh banks - the better to help dozens of small, but healthy banks, which uderzhatsya afloat.

Another detail. If the state decided to suicidal step and rekapitaliziruet problem banks, it will have to face the problem of external debt. Foreign creditors of problem banks are waiting for a change in ownership, to present Ukraine, those claims that are meaningless to make the owners of the banks bankrupt!

Everything that is happening before our eyes pushes to a conclusion: Ukraine should move to the bankruptcy of banks with the interim administration, and funds for recapitalization, to the replenishment of capital already owned by the state financial institutions - Oschadbank and Ukreximbank, as well as support for healthy banks. These banks are transferred to service depositors of banks bankrupt. This will be the most friendly to citizens step guide Ukraine. After this part of investors leave their money in these banks, making sure that their interests supported the state.
Bankruptcy

banks in the U.S.

financial crisis in the United States continues. The number of problem banks in the United States in the first quarter of 2009 compared to the fourth quarter of 2008 on increased by 20% - up to 305 institutions with assets is 220 billion dollars, the Federal Deposit Insurance Corporation (FDIC, Federal Deposit Insurance Corporation) . The amount of the insurance fund declined in January-March compared with the previous quarter by 25% - up to 13 billion dollars

Black List FDIC this year became the longest in the last 15 years. Since the beginning of the year the corporation has, under the management of 36 problem banks, which cost 6.2 billion dollars, deducted from the insurance fund. According to estimates of analysts from the nearly 8 thousand United States more than 500 banks could close by the end of 2009 due to lack of funds.

in the United States is a dispute whether to support the budget problem banks. It is not only small and medium-sized banks. Largest bank went bankrupt the state of Colorado New Frontier Bank of Florida, and Bank United Financial Corp. The bankruptcy of the latter at the end of May 2009 cost of FDIC in a high amount - $ 5 billion in the United States after the bankruptcy of the bank, all depositors receive checks by mail from the FDIC for the full amount invested. And do not have to go and no one should complain!

notion of problem banks with the interim administration in the United States absent. Detailed and regulated bankruptcy proceedings attempts to abuse by the owners of a bankrupt bank.

At the end of April 2009 at a meeting of the Joint Economic Committee of Congress, Nobel Prize Laureate in Economics, Professor Joseph Stiglitz of Columbia University and Professor Simon Jones warned that the policy of support for problem banks could slow the recovery of American economy. In their view, if the administration of Barack Obama will not make the banks responsible for the problems created by them, the U.S. will lose a decade of economic development. Dzh.Stiglits believes that the country needs new banks, rather than crisis giants, surviving at the expense of taxpayers.

President of the Federal Reserve Bank of Kansas T. Henig notes that the Government should allow troubled banks to bankruptcy, and not support them. In his view, the policy in respect of problem banks should be consistent, not depending on their size and relationships, or the restoration of confidence in the markets and the normal functioning of the economy is impossible. Polls confirm U.S. media support this idea public.

In all this we may ask: The U.S. government has already helped many banks at the end of 2008. Was it approved by the U.S. Senate Paulson plan, within its framework to support the banking system were to allocate 700 billion dollars. Since then, recapitalization of banks spent about 254 billion dollars, in exchange for which the Ministry of Finance has received the U.S. assets of 176 billion dollars

In February 2009, U.S. taxpayers know that their losses from this aid amounted to 78 billion dollars which was not indicative of the success of Paulson Plan. Moreover, the assessment of the consequences of its implementation is now a lot of criticism from both Democrats and Republicans.

They learn from their mistakes. And we? Do we need their personal rake?

Michael Strelnikov