Banks may be banned to have correspondent relations with low-ranking foreign partners
2012-11-01 12:30:21
The National Bank of Ukraine wants to prohibit Ukrainian banks from having correspondent relationships with foreign institutions rated below BBB, the Kommersant Ukraina reported.
The National Bank may deny a non-resident bank registration of correspondent accounts and cash float accounts if it is not included in The Bankers` Almanac and has a credit rating lower than BBB on the international scale, confirmed in the bulletin of the agency Standard&Poor's, or an equivalent rating of Moody's Investors Service and Fitch, according to a relevant draft decision of the NBU.
BBB rating means that a bank has sufficient capacity to meet its financial obligations, but a great sensitivity to adverse economic conditions.
The purpose of such changes is to protect Ukrainian banks. "The innovations are aimed at preventing the transfer of funds to credit institutions that have big risks in terms of reliability, transparency and repayment of transactions. This change in itself can be considered positive for investors in Ukrainian banks," BrokBusinessBank chief analyst Oleksandr Fedyk says.
In addition, the National Bank strives to limit the withdrawal of capital. "If a bank has no rating, there is a likelihood that it is in the area of soft jurisdiction. In some offshore zones, any individual may set up a bank, and this pattern may be used to take capital abroad through correspondent accounts," according to the chief financial analyst of Expert Rating, Vitaliy Shapran. "Most of the Ukrainian banks' settlements in the U.S. dollars are made through the Bank of New York Mellon and Deutsche Bank Trust, in the euro through the German Commerzbank and Deutsche Bank, as well as French banks. Problems may also arise in Russia, where there are large banks with a rating lower than the sovereign. But our banks may open correspondent accounts at Sberbank of Russia, VTB or VEB," he added.
Until now, there have been no restrictions on cooperation with partners that do not have ratings. If a bank is going to work with an institution outside The Bankers' Almanac, it should just give the regulator copies of its financial statements and an auditor's report on their reliability, as well as copies of documents confirming that the partner has a permanent office at the place of its registration.
The total number of banks in the world rated below BBB or unrated is unknown. For example, there are 1,128 such banks among 3,474 banks rated by the agency Fitch Ratings.