Edi­tor’s Note

Ukraine’s bank­ing sec­tor is in much bet­ter shape now than it was four years ago, be­fore the Na­tional Bank of Ukraine cleansed the sec­tor of half of its banks, leav­ing less than 100 in­sti­tu­tions.

Kyiv Post Legal Quarterly - - Contents -

The liq­ui­dated “pocket banks” were cash cows for cor­rup­tion — the own­ers of the banks were also the own­ers of the com­pa­nies that the banks fi­nanced, us­ing the money of de­pos­i­tors. Many of these loans were never paid back, with tax­pay­ers on the hook for at least $20 bil­lion in losses.

The most strik­ing case in­volved Ukraine’s largest bank, Pri­vat­bank, which was for­merly owned by bil­lion­aire oli­garchs Ihor Kolo­moisky and Gen­nadiy Bo­golyubov. The two al­legedly si­phoned off $5.6 bil­lion from the bank to fi­nance their busi­ness em­pires. The pocket banks even­tu­ally went in­sol­vent, declar­ing bankruptcy when the in­sti­tu­tions could no longer sus­tain the fraud.

The econ­omy is suf­fer­ing the con­se­quences. The money that fu­eled cor­rup­tion would have been bet­ter spent on pro­duc­tive in­vest­ments in Ukraine. It wasn’t, and so the econ­omy is still strug­gling, forc­ing mil­lions of Ukraini­ans to look for bet­ter lives abroad.

The sec­tor is fi­nally mov­ing in the right di­rec­tion, yet ob­sta­cles re­main to in­creased lend­ing. Much re­mains to be done to re­store trust. Many sim­ple fi­nan­cial trans­ac­tions are still tan­gled in red tape, and smaller busi­nesses, op­er­at­ing on tight mar­gins, are es­pe­cially hurt. In this is­sue, we take a look at the prac­ti­cal prob­lems faced by these peo­ple – prob­lems with money trans­fers, an un­sta­ble ex­change rate and dif­fi­cul­ties im­port­ing and ex­port­ing goods and ser­vices.

The Na­tional Bank of Ukraine and ad­min­is­tra­tion of Pres­i­dent Petro Poroshenko should be at the fore­front of so­lu­tions, yet change is ag­o­niz­ingly slow. For starters, state-owned banks, which make up half of the as­sets of the bank­ing sec­tor, should face quick pri­va­ti­za­tion.

The cen­tral bank still has some “weed­ing out” of weak or sus­pect banks. The suc­cess­ful trans­for­ma­tion of Ukraine’s bank­ing sec­tor is cru­cial for Ukraine’s eco­nomic growth. Banks are the na­tion’s fi­nan­cial ar­ter­ies. They have to be healthy, en­sur­ing the swift, ef­fi­cient and ef­fec­tive cir­cu­la­tion of cap­i­tal. All of our con­tacts are avail­able on­line at http://www.kyiv­post.com/con­tacts/

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