кредит

How do banks hide problems?

To date, the National Regulators closely monitor the financial standards of banks (normatives for the adequacy of regulatory capital, current liquidity, etc.), and also pay special attention to banks that violate these standards or are close to it. However, good accountants know how to move the numbers in the financial statements so that the results of the bank’s operations can be adjusted to take into account the current demands of the shareholders, if for some reason they are unable to contribute additional capital to the bank.

How do banks hide problems?

Of particular interest to auditors is always the “other assets” column, which can be a dumping ground for assets that are not core to the bank, their real value is difficult to assess, and they do not fall under the standard asset categories of bank balance sheets, such as funds, loans, valuables papers, accounts receivable. The presence of other assets may indicate the low quality of bank assets. One possible option is that the bank keeps the promissory notes on the balance sheet (they are not securities and do not guarantee the return of funds to the borrower), thereby lending to companies close to the shareholders. The bank’s management can use this category if the level of loans per counterparty exceeds the maximum allowable level, as this maximum is controlled by the NBU.

The bank’s assets include:

Loans issued;
Cash;
Securities;
financial assets;
Fixed assets;
Investments and subsidiaries;
Investment Property;
Other assets
Of course, there are no reports on many banks in Ukraine anymore, because more than 70 banks went bankrupt in 2014 and closed.

What is the current situation?
The average indicator for the entire banking system does not exceed 2.3%, which is somewhat significant in monetary terms and amounts to 29.47 billion hryvnias. The leading banks in terms of the share of other assets as of the second quarter of 2016 are PrivatBank with 15.7% (4.9% at the end of 2015), Clearing House (15.5%), Trust Capital (13.4%), Concord bank (10.7%) Commercial Industrial Bank (9.5%), Land Capital Bank (16.9%), Family Bank (9.1%), Crystal Bank (9.4%). For example, in the Dutch bank, this indicator has never exceeded 0.1%, and the state banks Oschad and Ukrexim, the German Raiffeisen Aval keep this indicator within 1.0%.

Of course, the assessment of the bank’s financial condition should be carried out comprehensively and only “other assets” cannot reflect the real state of affairs, but a pattern can be traced, and depositors, like the NBU, should not ignore such signals.

It is best to follow the news provided by the banks, as well as to study the reporting for a specific period. Thus, if the bank hides any problems, the client will immediately be able to understand it and take the necessary measures.