Banks in Canada and Ukraine sign deal on cooperation (09/20/98)

Banks in Canada and Ukraine sign deal on cooperation

by Andrij Kudla Wynnyckyj
Toronto Press Bureau

TORONTO - On the afternoon of September 10, in an office on a stretch of Bloor Street in Toronto's West End known as "the Ukrainian Bay Street," officials of Lviv's Electron Bank signed an agreement with their counterparts of the Buduchnist Credit Union, which provides for "an easy exchange of funds between individuals and companies in each country [Ukraine and Canada] at reasonable rates."

The agreement was brokered by the Toronto-based investment consortium Ukraine Enterprise Corp. (UEC), which has a 21 percent share in the western Ukrainian financial institution, and is its second largest shareholder.

A press release about the agreement indicates that funds from Canada can be "deposited into interest-bearing accounts or instruments in Ukraine" and that the receiving institutions undertake responsibility for "the proper delivery of the funds to the [specified] recipient."

At a reception held later that evening, attended by about 50 officials and members of the financial community from Ukraine and Canada, Electron Bank President Larysa Zahorodnya said the agreement "will enable clients of both institutions to effect financial transactions in a civilized fashion" and eliminate the uncertainties previously associated with trans-Atlantic transfers of funds.

Ms. Zahorodnya said that thanks to the agreement her bank is ready to handle matters such as the transmission of various sums to relatives, the transfer of funds for use while traveling in Ukraine, donations to target institutions in Ukraine and larger transactions involving investment in Ukraine's companies.

As explained by Ms. Zahorodnya, the agreement provides for no minimum or maximum transfer.

She pointed out the agreement also covers the movement of money from Ukraine to Canada, saying, to some mirth among the audience, "I'm sure that soon there will be millionaires in Ukraine who will want to assist individuals and institutions in Canada; it's a normal process of development."

Oksana Prociuk, Buduchnist general manager, told the audience that funds would be paid out in Ukraine within three days of having been submitted for transfer in Canada, in U.S. dollars, with a commission of 1.5 percent of the sum transferred.

Ms. Prociuk said that over the years Buduchnist had sporadically conducted similar transactions with other institutions in Ukraine, but found that Electron, although smaller than other banks in that country, was the easiest to work with and its management seemed most actively concerned with customer satisfaction and Buduchnist's needs.

The Buduchnist official said the relationship with Electron will provide order to the chaotic efforts previously required to locate a receiving institution for funds at various points in Ukraine. She said the agreement empowers Electron to do the search for the appropriate institution in Ukraine which would issue transferred funds.

Ms. Prociuk said the current agreement is seen by both sides as a first step, with further arrangements still in negotiation. Among items to be pursued are provisions for estate transfers, the sale of Ukrainian government bonds to Canadians, the exchange of personnel and assistance to credit unions in Ukraine.

Boris Balan, the UEC's vice-president in Ukraine, told the audience that Electron Bank had been the consortium's first investment, and that Electron's professional management team makes it a worthy partner.

Mr. Balan told The Weekly the agreement was the first concluded by two Ukrainian and Canadian financial institutions to formally state conditions of fund transfers and offer guarantees. He said the initiative for the agreement had come from Buduchnist, whose officers contacted the UEC to express their interest in establishing a partnership with a bank in Ukraine.

Mr. Balan said the Electron Bank is "an ideal gateway for people who can do more in the Ukrainian market" and would be a logical banking partner for firms interested in participating in Team Canada's mission to Ukraine in January 1999.

According to the September 10 press release, Buduchnist's assets exceed $180 million (Canada), with five branches serving over 11,500 members in Toronto, Ottawa and Hamilton. Electron Bank's assets are described as "in excess of 34 million hryvni on a Western-audited basis" with over 250 employees, four branches in western Ukraine and a network of sub-branches and exchange kiosks.

The Ukrainian bank was established in 1991 with the backing of the Electron military-industrial concern which had at one point manufactured 25 percent of the television sets in the former Soviet Union.

Effects of Russian crisis

Ms. Zahorodnya devoted part of her address to the possible effects of the financial crisis in Russia. The Electron Bank president said reports of runs on banks carried by Russian TV stations broadcasting in Ukraine had provoked considerable anxiety, but that much of it had abated since Ukrainian banks have been able to cover requests for cash withdrawals from accounts, and that depositors' confidence in the stability of Ukraine's banking system is rapidly returning.

Ms. Zahorodnya also said Ukraine's hryvnia hasn't suffered anywhere near the precipitous devaluation that has crippled the Russian ruble. She pointed out that the very indicators that had suggested Ukraine was lagging in terms of market reforms, such as an underdeveloped currency exchange, have served to insulate Ukraine from the crisis.

Mr. Balan added that the widely differing levels of foreign investment in the two countries have also been a factor. He estimated that about 60 percent of Russia's economy has been opened to foreign capital, while only about 10 to 15 percent of Ukraine's is similarly exposed. He said that "nervous money withdrawals" from Russia were thus much more damaging to that country.

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