Posted on 02/26/2014 8:39:10 AM PST by Svartalfiar
Well that escalated quickly. It seems the ouster of Yanukovych, heralded by so many in the West as a positive, has done nothing to quell the fear of further economic collapse in Ukraine:
*UKRAINIANS WITHDREW AS MUCH AS 7% OF DEPOSITS FEB. 18-20: KUBIV *DEPOSIT WITHDRAWALS STILL HIGH IN THE EAST, KUBIV SAYS
This is around a 30 billion Hyrvnia loss (over $3 billion) in just 2 days for the banks and the new central bank chief is considering "stabilizing loans" to help banks deal with the liquidity crisis (though Ukraine's reserves stand at a mere $15 billion).
Reserves are in freefall... and will only get worse if the bank run continues...
One point to pick apart, this isn't a true 'loss' of $3B for the banks. It's a loss in reserves, but it isn't actually the banks money so they aren't truly losing it.
Actually, if there were a 7% run on the banks in this country in the span of a couple of days, I really believe we’d be talking “Escape from New York” or something like that. Total Chaos...
I suspect that those withdrawing their dough are gonna exchange it for other currency, ....for a fee.
What is interesting to observers is this was done ahead of negotiation with the IMF. The IMF would have required some sort of floating currency. This indicates the situation was desperate and the central bank needed to move faster than the IMF can bail them out.
ping
Yeah ok. Zerohedge tends to hyperventilate a little in these situations. I remember how Greece was going to go Mad Max because of “bail-in” related bank runs a couple of months ago. Now that I think of it, ZH would have had them completely bankrupt half a dozen times in the past three years or so.
How long before they impose “capital controls”?
Banks take in deposits and loan them out.
If the deposits dry up, banks have no money to loan out to anyone for any reason, unless the govt. prints up a bunch more.
This is very detrimental to the economy.
The problem isn’t that the banks have less money on their sheets, the issue is that they don’t have the physical money on hand to cover all deposits the banks are responsible for. So when people go to the bank, try to get their money out, and can’t, is when the real issues start. While the lend-deposit cycle is what helps create growth, the problem arises when people want their money, and the banks have it stuck in 5 or 10 years loans or whatever. The money isn’t lost, it’s just not accessible to the bank as a liquid asset. And confidence in the economic/financial viability is what keeps this going. When that snowball starts rolling downhill is when the bad things begin. Yes, the fed (Ukraine gov) can print money to cover this, but that is extra money that isn’t truly in the system. And when the government can print off any money, to cover any deficiencies in the system, is when people lose faith in that money and it loses value.
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