Dozens of Ukrainian banks face closure after missing new minimum capital requirements that came into force on July 11.
The National Bank of Ukraine (NBU) passed resolution 242 exactly a year ago giving the owners and shareholders of banks a year to ensure minimum capital was raised to at least UAH200mn ($7.7mn) by this week's deadline.
Many of them have not reached the new minimum capital requirement, and although the NBU could withdraw licences now, experts say that the banks that missed the target will be put under close supervision and asked to come up with a realistic plan of how they will increase their capital; closures are likely only start at the beginning of next year if they fail.
The resolution is part of the central bank’s clean-up programme for the sector and should lead to more banks closing or merging with their larger rivals. About 100 banks have been closed in the last two years, but more than 100 banks are still operating and meet the new requirements, which analysts consider to be too many for such a small market.
The NBU has already simplified the procedure for the reorganisation of banks through mergers earlier this year, which will enable banks "to shorten significantly the duration of the reorganisation process, including by speeding up the document review process by the regulator", the regulator said in a statement.
As of July 12 it appears about a dozen banks will not have raised and registered the required UAH200mn capital level, although some are very close. For example, MetaBank is less than UAH10mn from that figure and within the next few days will probably meet the requirements. At the other end of the scale, Kredit Optima Bank is some UAH80mn short of the required capitalisation.
“At the time of writing, with several hours to go (and no doubt with a few days grace to be added), it seems that Motor Bank, Center Bank, the aforementioned Kredit Optima, UBRR (which may well get a capital injection from China imminently), Ukrstroyinvestbank, Akkord Bank, Sky Bank (recently bought by a Kazakh investor), Hephaestus, Policom Bank, Ukrainsky Capital, Gefest, Alpri Bank, Aboks Bank, Portal, Alt Bank, Sich (likely to also see an imminent capitalisation), Kommercial Industrial Bank, Paschetniy Center, AP Bank, Vernym Bank and the aforementioned MetaBank remain under-capitalised by way of the registered capital (rather than capital held),” blogger Nikolai Holmov wrote in his OdessaTalk.
The failure to meet the new minimum capital requirements means the NBU will recognise these banks as being problematic and require a strictly monitored action plan for compliance over the next six months.
“In all likelihood, only in mid-January 2018, when all ‘reasonableness’ has been seen to be exhausted by the NBU, would forced administration begin – unless it becomes completely clear that there is simply no way compliance can or will be achieved before,” opines Holmov.