Dangerous liaisons. Banks are sacrificing profits to ensure the safety of their employees in the ATO zone

Few escaped ATMs in areas in the East of Ukraine

Photo: Reuters

Following the key borrowers in the eastern region of Ukraine, namely representatives of major business, banks are folding their operations in the Anti-terrorist Operation (ATO) zone in the Luhansk and Donetsk oblasts. The corresponding resolution of the National Bank of Ukraine No. 466, which prohibits financial institutions to perform any financial transactions on territories that are not controlled by the Ukrainian government, was one of the main reasons for such a move.

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“A large number of bank branches in the ATO zone are not functioning. Most banks are not ready to subject the lives of their employees and clients to such risks. The efficiency of operation in these conditions is also quite doubtful: there are practically no clients and business has been suspended. There are, however, several financial institutions that are trying to organize the operation of their offices in some kind of format. This could be operation under a closed door regime, when clients are serviced upon calls or within short working hours. These, however, are exceptions. For the most part, the prospects of the region are highly controversial, says advisor of the CEO at Eurobank Vasyl Nevmerzhytskiy.

Business and ordinary people, he says, left large cities and some banks with offices in the ATO zone have already moved to other regions or are in the process of doing so. For instance, PUMB (First Ukrainian International Bank) closed around 30 branches in the conflict region and moved from the ATO zone around 640 of its employees. Finance and Credit suspended servicing of its clients in branches located in the ATO zone. “To put it simply, they are closed for clients,” says Director for Coordination of Regional Network Operation at Finance and Credit Oleh Daleko. He also informed that sometimes the banks cannot renew their operation on liberated territories due to power outages or the cut-off from communications.

PUMB began preparation for emergency situations during the Euromaidan in Kyiv. A number of employees of the Kyiv office were then moved to a practically empty office in Donetsk, says Deputy Chairman of the Board at PUMB Tomasz Wishniewski. Also, the client service center of the financial institution was located in two cities simultaneously: in Kyiv and in Donetsk. However, when the unrest moved to the eastern part of the country, the bank made a decision to move its one of the two Donetsk data processing center (DPC) to a safer place and its employees to ‘peaceful regions’. “All banking processes go through DPC. In spring, when the situation in the east heated up, we made a decision to divide the infrastructure and move Donetsk DPC to a safer place in Ukraine. Insurance companies that insured our equipment and Visa and Mastercard payment systems were involved in the process. It took a week to move the DPC and another six days to put it back into operation. Now we have launched the process of creating another DPC and we hope that it will be put into operation by the end of the year. Its cost is several million hryvnia, but data security is worth the price,” says Wishniewski.

Also, the operation of ATMs in the Donetsk and Luhansk oblasts is complicated. “It is extremely dangerous to recover and provide cash to them. The security is trained and ready to meet armed people, but not insurgents in tanks and armored vehicles,” says Nevmerzhytskiy. ATMs have been shot at and armed individuals even apprehended cash transit vans of certain financial institutions. It is quite difficult to replenish ATMs with cash under such conditions.

The state-owned Oschadny bank is trying to maintain operation in the “hot zone”. “In eastern regions we operate as the situation allows and in correspondence with the instructions of the NBU. On the territory, when state pensions must be paid, we must ensure our operations and that the requirements to preserve the health of our employees and clients are met,” CEO at Oschadny Andriy Pyshniy told Capital.

To help the weak

Despite operation problems, banks are trying to meet their clients halfway. Many financial institutions offer borrowers preferential programs for debt servicing. For instance, UkrSibbank BNP Paribas group reviews the possibility of re-distribution of outstanding debts, postponement of overdue payment of interest for a future period, delay for repayment of the debt principal for the term of 3-12 months and also cancellation of penalties for outstanding debts (fees, double interest, commission, etc. “The bank is ready to consider each application of the client and in case the client cannot pay in full, individual mechanisms of easing the load are applied,” says Head of the Crediting Department of the bank Oleksiy Tikhonov.

In the beginning of August UniCredit Bank cancelled all penalties and fees for failing to fulfill the conditions of a loan agreement for clients living in the ATO zone. “We introduced a six-month delay for payment of the loan principal, commission and half of the interest for the residents of the eastern regions. The option applies to the Luhansk and Donetsk oblasts. At the same time, the procedure of debt restructuring has been simplified,” says Head of the Credit Product Department at UniCredit Bank Maryna Revutska. The Finance and Credit bank is also ready to restructure loans for individuals, entrepreneurs and small businesses.

Many banks introduced credit breaks for clients that were drafted to the army back in spring. “For the period of their service, the clients will be granted a break for repayment of the loan and the interest will not be accrued. In case penalty sanctions have been charged, they will be written off,” Retail Business Development Director at Alfa Bank (Ukraine) Artur Atanov told the publication. Also, UniCredit Bank offers clients who were drafted to the army, a deferment of repayment of the loan principal for a term of up to six months and an interest rate of 0.1% per annum, as well as repayment of charged interest money in the full amount after the term of interest deferment.

Taking into account financial losses of the banks from the events in the east of the country (for instance PUMB estimates the losses at UAH 10-30 mn, not taking into account the operational losses) and also deterioration of credit portfolio and outflow of deposits multiplied by devaluation of the national currency, the NBU also made a concession for the banks by passing a decision at the end of August to not apply penalty sanctions for violation of economic standards and standards of general open currency position limits.