KYIV, July 9 – Weak demand for loans in Ukraine is hindering the government’s efforts to reinvigorate lending through special programs designed to accelerate growth, Oleksandr Pysaruk, chairman at Raiffeisen Bank Aval, said.

"It is important to say that one should not initially expect a breakthrough, revolution from new programs. These were unrealistic expectations. Solvent demand for loans falls anywhere and at any time in a crisis. And that demand, which is growing, is often insolvent," he said in an interview with Interfax-Ukraine.

Pysaruk said that clients who would give loans to the bank do not take them because of responsibility and professionalism. They postpone investment projects and optimize the management of working capital in a crisis to reduce risks and costs.

"This, in turn, leads to a drop in demand for short-term and long-term loans from solvent borrowers," he said.

The board chairman of Raiffeisen Bank Aval added that loans are most often requested by those borrowers who have problems with solvency that may lead to loan defaults.

Pysaruk said that each bank has its own credit policy and highly reliable banks are conservative.

"If we are not conservative enough, then we will not be reliable to such an extent. We are proud that, being the third bank by the size of its working loan portfolio, we are the most reliable bank in the country for many years," he said.

According to Pysaruk, government support programs for loans have their pros and cons. They introduce the so-called "market distortion" and are subsidized by the budget, which capabilities in Ukraine are limited, so they should be used carefully.

He said that many countries are introducing similar programs during a crisis, because the state understands that businesses, especially small and medium-sized ones, must be assisted.

"It seems to me that these are good programs and good initiatives, especially credit programs supported by portfolio guarantees of the government. Compared to some other countries, the Ukrainian government has structured these programs well, although it is difficult to structure such programs in general," he added.

Pysaruk said that Raiffeisen Bank Aval is participating and will participate in all government programs.

"We are the fifth largest bank in the country in terms of assets and the third largest lender in all segments of the Ukrainian economy," he said.

According to him, five-year refinancing loans and interest rate swaps are also excellent initiatives that allow banks to issue more long-term loans.

"The structural problem in the banking system is the lack of long-term resources: we do not have capital markets, there are no insurance companies, and there are no private investors who usually have long money. Therefore, always, even if there is excess liquidity, there is a large gap in maturity, which creates a liquidity risk and interest rate risk," he said.

Pysaruk said that Raiffeisen Bank Aval took UAH 400 million of refinancing loans, which the bank does not need in terms of liquidity, to help the National Bank of Ukraine test the pilot project.

"We do not take long-term refinancing of the NBU for the purchase of bonds, which are a more liquid instrument than long-term loans... Of these UAH 400 million, we have already issued UAH 282 million for long-term loans, and we will lend the remaining ones," he said. (om/ez)