Banks and Interest Rates and Deposit Security in the FSU.

[andrewfi]

Errrm, times change.

Citibank does online banking offering the transactions that you want: http://www.citibank.ru/russia/services/eng/cbol.htm

Bank guarantees are no more likely to change due to a change in government than they wil inthe US when the Democratrs take over. They were introduced to add stability to the financial system and even a return to a dictatorship would not want to remove the stability that guarantees offer. Of course, as the Ruble appreciates the need for such a guarantee tends to remove itself.

One thing for sure though, for many Russians it is unlikely that the banking system will ever return to full credibility during their lifetimes - however this is the result of superstition and not rational thought.

[Chris]

BANKING SYSTEM IN RUSSIA DOES NOT CAUSE APPREHENSIONS

NEW YORK, April 16 (RIA Novosti) - The banking system in Russia is stable, Andrei Kozlov, the first deputy chairman of the Bank of Russia, said at the opening of the "Investment Possibilities in the Russian Banking Sector" conference in New York.

He said that 98% of the Russian credit institutions were financially stable now.

According to Mr. Kozlov, this year, when the system of obligatory insurance of the deposits goes into effect and credit institutions begin submitting their financial accounting records in accordance with international accounting standards, "will clearly show the situation of the Russian banking system."

He also said that there were no plans to transfer supervisory functions in the banking sector from the Central Bank to the Federal Service for Financial Markets.

"We had plans for cooperation and coordinating the activity, but not anymore," Mr. Kozlov said.

In an interview with RIA Novosti, Mr. Kozlov said that the main goal of the conference "is to change our American colleagues' attitude to the Russian banking system."

"We want to show our partners the positive trends that are now going on," he said. "Today the situation in our banking sector is much better than two or three years ago."

John Taylor, a U.S. Treasury under secretary, said that the United States attached very great importance to the American-Russian banking dialogue.

Mr. Taylor said that the United States supports Russia's entry into the WTO because it would be in the interests of American business, including the banking business. He said that the U.S. actively contributes to the development of mortgage lending in Russia, including work on the secondary housing market. He also said that through the European Bank for Reconstruction and Development the U.S. granted $40 million to finance the Russian small and medium businesses, which is very important for the growth of the private sector in Russia.

The conference is the third in the series of foreign forums that were organized by the Association of Regional Banks of Russia. The previous conferences were held in Frankfurt am Main and Budapest in 2003.

More here......

[Chris]

and it seems Russia is not immune from the crunch also.............

Russia shores up banking system
Russia’s Ministry of Finance has sought to safeguard the country’s banking system by pouring $ US 752.7 million into commercial banks.

It’s the second time the Ministry has stepped in to avoid the global liquidity crunch claiming Russian victims.

According to the RIA news agency, the cut-off rate has made up 7.25 percent per annum. The money has been placed under the average rate of 7.26 percent. As judged by the results of the auction, the demand was fully satisfied.

The first auction was held by the ministry on April 17.  About $ US 1 billion of temporarily available budget money has been posted.

[jlogajan]

Deposit insurance is more psychological than a true fix-everything solution.  Insurance is always a fractional thing -- it is sold to a lot of people on the assumption it will only ever have to pay out to a few.   A massive run on banks would collapse even the USA FDIC -- but it is presumed the psychology of early protection of the first failing banks will prevent runs on the other healthier banks.

There can never be enough insurance to cover all issued policies.  It would be a waste of resources for one thing.  You'd sort of have a duplicate economy in storage just sitting idle waiting to be paid out.

The moral of this story is that any banking system can fail if enough goes wrong (including bad governments.)

[cufflinks]

Looks like we might be the ones needing a bailout from our NRB friends...  Any NRBs with an extra 10.6 Trillion pesoized dollars kicking about?

1. Ford posts $8.7 billion loss on asset write-downs

2. House Approves Sweeping Effort to Help Housing  (New York Times BUSINESS Section)
By DAVID M. HERSZENHORN
Published: July 24, 2008

WASHINGTON — The House approved far-reaching government assistance on Wednesday for the nation’s housing market, including broad authority for the Treasury Department to protect the nation’s two largest mortgage finance companies from collapse.

The White House, citing an urgent need to restore market confidence in the two mortgage giants, Fannie Mae and Freddie Mac, said President Bush would sign the measure despite his opposition to the inclusion of nearly $4 billion in grants for local governments to buy and refurbish foreclosed properties.

But the legislation, much of which has been debated and fretted over on Capitol Hill for months, also leaves numerous questions unanswered. The biggest unknown is whether the measure will be adequate to slow the downward spiral of home prices and help the economy recover from what many analysts now expect to be a prolonged slowdown.

Perhaps most significantly, the legislation hardens the government’s long-implicit assurance that it would step in to rescue the two mortgage giants who together own or guarantee about $5.2 trillion of the nation’s $12 trillion in mortgages. Currently, Fannie Mae and Freddie Mac guarantee financing for about 80 percent of new mortgages.

To accommodate a potential rescue for Fannie Mae and Freddie Mac, the bill raises the national debt limit to $10.6 trillion, an increase of $800 billion.

[cufflinks]

Make it easy and buy Euros.

Sterling is too tied to the dollar, the Euro is going to rise against those two, even if the ECB does not want it to and the banking system is a tad safer than Russia, although to be fair, Russia now has a deposit guarantee scheme and, apart from the boutique banks set up and owned by large firms for their own purposes, bank failures are rare. It is unnecessary for the Russians to do any forced currency exchanges these days so folks are very unlikely to lose their deposits any longer.

You can keep your Estonian account in Euros if you wish it and, of course the Kroon is tied to the Euro anyway so you can get some of the most sophisticated internet banking in the world - Hansabank's new system is due to be unveiled in a few days and supposed to be the dog's dangly bits.

Andrew:

Anything like these APTs in Euro denominated accounts in your neck of the woods that you would trust as a haven for investment/rainy day/survival funds or "RU Adventiure"/investment funds?

Or is it only the UK secret banking centers that offer this level of protection - many US MDs and businessmen set up APTs in Bermuda, Bahamas and especially GCI due to their APT laws to protect from potentially crippling malpractice suits, or disgruntled GCGs    etc... key is you have to set them up well in advance before the US Courts have a chance to freeze your assets (First thing most US Divorce attorneys try to do).  And make sure only your Estate Administrator has the envelope with the key codes for your heirs if and when you want them to get it.

Asset Protection Trusts - Cayman Islands

A trust on the Cayman Islands settled without local resident beneficiaries may register as an “exempted trust” An exempted trust is granted a fifty year tax holiday. The law permits substantial flexibility, including a fixed perpetuity period or up to 100 years, provided the trust is submitted to the Registrar for advance approval. In addition, Cayman law permits the selection of Cayman law in the trust instrument even though neither the settlor, the trust property nor the trustees have any connection with the Cayman Islands. If Cayman law is selected, the trust cannot be voided on the ground that it contravenes the laws of another jurisdiction (including forced heirship laws), including the domicile of the settlor, or is not recognized by the law of another jurisdiction (e.g. purpose trusts).

Despite the less favorable trust law and despite the fact that a comprehensive review of trust legislation is currently in process, the Cayman Islands remains one of the favored jurisdictions for the settlement of asset protection trusts. The Cayman Islands, like the Bahamas, has strong secrecy laws.

The Cayman Islands boast a very strong banking presence. Grand Cayman has 538 Banks which hold over $430 billion in deposits. By way of comparison, that makes Grand Cayman one of the world's ten biggest financial centers, comparable to London, New York and Tokyo.

[AkMike]

I've got accounts at Bank Aval (associated with Raffiesen Bank). They appear to be the biggest in Ukraine, therfore the most stable. They have a $10,000 USD insurance on deposits and I'm getting 7.3/4% on a 3 month deposit. I'm not a resident either. There was never a mention about that.
 Other bank advertisments show up to 17% on Hyrivna, lesser on rubles and euros and dollars. But these are the newer smaller banks that are just getting started and might not be as stable.

[BCKev]

Over the last few weeks I've been checking the deposit rates on Ukrainian banks.

These are the highest I found for a guaranteed 6 month deposit (minimum balances 1000rph, US$300, €300)

Grivna  18.75%
US$      12.5%
Euro      12.5%

[Manny]

6 months?    Those are very good rates.

Which banks?

[WestCoast]

Over the last few weeks I've been checking the deposit rates on Ukrainian banks.

These are the highest I found for a guaranteed 6 month deposit (minimum balances 1000rph, US$300, €300)

Grivna  18.75%
US$      12.5%
Euro      12.5%

What legitimate bank even in the Ukraine would pay those type of interest rates on a 6 month deposit with a 300 USD or €300 minimum?  Doesn't make sense, are you sure this is a legitimate bank?

[BCKev]

6 months?    Those are very good rates.

Which banks?

I'd have to find out the name of the bank from Arina, I'll post it when I get the name. She came across the rates I posted just after I left. We went around to a number of banks while I was there.  The rates on 6 month deposits ranged from 14.5% to 18.75% for grivnas. US$ and Euro denomitated deposit rates ranged from about 8 to 12.5%. The US$ rates were usually 1% higher than the Euro rates.

We picked up a rate sheet from each bank, and figuring I wouldn't need them here, I left them all in Ukraine. 

From my fading memory, these were the rates for a similar deposit at the Ukrinbank (or Ukrsibbank or Ukrsotsbank ):
18.5% grivna, 12% US$, 11% Euro.

Privatbank was paying 14.75% for grivna deposits.

[BCKev]

What legitimate bank even in the Ukraine would pay those type of interest rates on a 6 month deposit with a 300 USD or €300 minimum?  Doesn't make sense, are you sure this is a legitimate bank?

I can't say anything about the legitimacy of an individual bank, but the fact that rates like these are common among the banks there does suggest that there is some legitimacy. Over half of the banks we went to had rates of 17 to 18.5% for grivna deposits, and the minimum deposit amounts were about the same.

I had the same question about this making sense!!  I didn't check out this in detail, but was told that many loans were charging 20%+ interest. So it does make sense that a bank can make money by paying the deposit rates I've posted, charging even more on their loans, and pocketing the spread.

I talked to a woman in my Canadian bank about these rates. She is a recent immigrant from Romania and told me that, at one time, the same thing happened there. It didn't last because the banks were unable to keep up the interest payments. There clearly is some risk: the banks' ability to pay interest, currency fluctuation and even though these are "guaranteed" deposits (up to 50,000 grivna), how good is the guarantee?

[Chris]

Over the last few weeks I've been checking the deposit rates on Ukrainian banks.

These are the highest I found for a guaranteed 6 month deposit (minimum balances 1000rph, US$300, €300)

Grivna  18.75%
US$      12.5%
Euro      12.5%

Some Ukrainian banks have been paying close to those figures for over 12 months now. Aval Bank is another bank to add to the list that pays similar rates as those. However I would question the 6 month minimum deposit, I think you will find it is nearer 12 months for foreign currencies.

There is another bank called the Nadra Bank which pays rediculous rates compared to even those above, but IMHO it would be a very risky deposit placing your cash with them.

[BCKev]

These are the highest I found for a guaranteed 6 month deposit (minimum balances 1000rph, US$300, €300)

Grivna  18.75%
US$      12.5%
Euro      12.5%

6 months?    Those are very good rates.

Which banks?

First Ukrainian International Bank

[BCKev]

Some Ukrainian banks have been paying close to those figures for over 12 months now. Aval Bank is another bank to add to the list that pays similar rates as those. However I would question the 6 month minimum deposit, I think you will find it is nearer 12 months for foreign currencies.

These rates: 18.5% grivna, 12% US$, 11% Euro, were for a fixed term of anywhere between 6 and 12 months. The rate for grivna deposits for 12 to 24 months was 19.5% at the same bank. I don't remember the US$ and Euro rates for the longer term.