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    March 1, 2016

    Ukrainian Banking Sector Is Becoming Russian

    March 1st, 2016
    by Yura Sumy for Politrussia
    translated for Fort Russ by Soviet Bear

    Several banks in Kiev were vandalized on February 20th. A day later the same thing happened in Lvov. They all had one thing in common — the origin. The parent structure of all the affected banks had Russian roots.

    Actually, today it is difficult and unsafe for the Russian banks to work in Ukraine, and yet Russia is the only country that seriously increases its weight in the Ukrainian banking market. And this is despite the so-called war against it on the part of Kiev. So what's the deal? What is behind the peaceful takeover of the Ukrainian banking sector by Russia?

    The Maidan, a coup, two years of the so-called “war with Russia”, the persecution against everything Russian and threats of direct violence. All this, apparently, should have squeezed the Russian banking capital from Ukraine, a country that declared a new economic course complete cutting ties with its Eastern neighbor. However, the reader will be astonished to learn the real state of affairs.

    The Russian banking capital rushed to Ukraine in an endless stream.

    The official statistics of Ukraine show that the share of Russian capital in Ukraine's banking sector accounts for only 15%, while acknowledging that it has grown over the past two years by half. But this is only the tip of the iceberg. Technically the "Alpha-Bank" did not make it into the stats (8th place by assets): the Central headquarters of the parent company are registered in Cyprus, which does not prevent the western analysts from attributing this structure to not just Russia, but to Vladimir Putin himself, who is using it as his “soft weapon”.

    The alpha group is rapidly increasing its share in the Ukrainian banking sector. A shock to all Ukrainian "patriots" was a merger of one of the Ukrainian banking giants — "Ukrsotsbank".

    The "Alpha-group" is not the only one increasing its presence. A variety of Russian business structures are doing this and the Ukrainian society learns about the next Russian "takeover” sometimes either accidentally or is completely ignorant about it.

    It should be understood that sometimes the Ukrainian assets that are formally considered European are actually under Russian control.

    For example, in 2012 "Sberbank of Russia" acquired Austrian Volksbank International (VBI). By the time of the transaction, the acquired Bank was in top 10 banks of Bosnia and Herzegovina, the Slovak Republic, the Czech Republic and Croatia and was part of the first fifteen banks in Hungary. As a result of the deal the Sberbank also bought the Ukrainian branch of the Austrian Bank.

    According to Vladimir Putin, and I believe him much more than the official statistics, at the beginning of 2015 the share of Russian capital in the banking segment in Ukraine in one form or another has already reached 30%. And according to market analysts, after the closing of the deal with Ukrsotsbank it reaches almost 40% (including all options of control).

    How bizarre. It would seem that Europe is finally fully entrenched in the territory of Ukraine and now such "treachery".

    Those interested in the political economics as a science have already understood it all. Politics is the continuation of the economy. The banking sector is the foundation of the modern global world. Who owns the banks, owns the country.

    What is the meaning of the presence of Russian banking capital in the Ukrainian territory? The meaning is jurisdiction. In fact, the Bank, even though it is called "Sberbank of Russia", is considered Ukrainian, so it is impossible to impose the sanctions regime or other restrictions against it. Technically it is possible – formally it isn’t.

    These banks, as well as the Russian offshore companies, will be able to participate in the economic life of Ukraine and in... the privatization, which the country is going to conduct very soon. Formally, Kiev is unable to prevent a Cyprus or other offshores from buying any asset, European companies do not believe in the future of the government and its economic policies as we have already seen by the flight of assets from the Ukraine.

    Therefore, the real buyers of the former state property of Ukraine will probably be the Russian companies. Through intermediaries, of course. And they have already shown their interest. You have to understand that the ban on privatization of state property in Ukraine is valid only for citizens of Russia and structures, where they are co-founders, but it does not apply to subsidiaries of subsidiaries of these companies or their business partners.

    By the way, credit portfolios of Russian banks in Ukraine are growing rapidly. It is exactly Russian banks that are crediting Ukrainian enterprises. And they do not specialize on the loans to the population, only lending to legal entities.  I. e you can see the obvious interest of the parent company.

    Deposit portfolios of “Russian” banks are also growing (mainly at the expense of legal entities). i.e, their credibility in business is growing:

    In 2015, "Sberbank of Russia" increased its total deposits by 25%, VTB Bank — by 9.5%, and "Prominvestbank" — by 13.5%. "Alfa-Bank" for this period has increased the deposit portfolio by 28%. For this period the volume of deposits in the entire banking system decreased by 26.5%.

    In general, banks with Russian roots are the most zealous executors of instructions of the NBU (National Bank of Ukraine). They obediently capitalize, they do not require refinancing, they increase the indicators. Another country would be glad if they did not understand that this is not by accident.

    The actions of the Russian banks show that Vladimir Putin is not going to leave Ukraine. On the contrary, he intends to increase his presence there, reconquering it gradually from its European and American "partners".

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