How to choose a bank to place a deposit?
For more than a year, as the population is gradually returning its savings to the banking system, it is on deposits. Therefore, the question of how to choose the right bank to place a deposit today is becoming topical again.
Everything was simpler up to the “bankopad” line: if necessary, the population’s deposit was guided by two main criteria – the money was carried either “to a large bank with a long history” or to a small bank, where the depositor personally knew the head of department / deputy chairman / chairman of the board decision, guided by the principle “he whispers me when necessary, if that.”
But the reality was different. The banks of all types, the largest and very small, were collapsing, and with them the hopes of a full return of their funds. Personal contacts did not work at all: depositors of more than 80 banks withdrawn from the market missed a total of billions of hryvnias.
So, what should you pay attention to when choosing a bank to place a deposit?
First of all, it should be noted that an ordinary investor, even with a basic knowledge of banking, is very difficult to assess the financial stability of a financial institution. And there are many reasons for this.
First, the financial statements of banks are published late, and it is not complete. A month in the bank balance can change a lot dramatically. In addition, a large aggregation of the balance sheet items and the income statement can say little about the financial condition of the bank (decryption and detailing of the open access by banks is not laid out).
Secondly, even quite satisfactory – in accordance with the regulatory requirements of the regulator – the value of different financial ratios and standards does not guarantee a good financial condition of the bank. For example, many bankrupt banks at the time of closure had “on paper” many generally accepted indicators in perfect standard — for example, the capital adequacy ratio or liquidity ratios.I recommend making decisions based on these basic facts:
1. Deposit rate
There is on the NBU website such a “Ukrainian Index of rates for deposits of financial institutions”. If the rate in the bank that interests you is 4-5% more than the interest rate of this index, then such a bank has a high probability of liquidity problems. If it is at a level of up to + 2% or below this index, this is evidence of the bank’s high liquidity, and you can place a deposit in such a bank.
2. Evaluation of the bank’s work by leading audit companies
If the audit of the annual financial statements of the bank is conducted by one of the so-called “big four” companies (the four largest companies in the world that provide audit and consulting services – PricewaterhouseCoopers, Deloitte, Ernst & Young, KPMG), this reduces your risks as depositors. Read their reports posted on the websites of banks. From them you can get a lot of interesting information about the activities of the bank (for example, about the riskiness of the credit policy).
3. Reviews of the bank on the Internet
There are many sites where customers of banks exchange opinions about financial institutions. The information on these resources is sometimes quite emotional, but if the bank has delayed / is delaying the return of deposits, one of the depositors will write about it.
4. Bank openness
Banks that develop their relationships with customers and value their reputation are constantly informed about changes in their work. If information is updated in the “News” section, this bank can be set to a big “plus”.
Separately, I would like to dwell on the “big bank” factor. At this, many contributors are stung. “Large”, “known” (read “rastiarenny”) – does not mean “reliable”. In Ukraine, the phrase “Too Big to Fail” (“too big to fail”) is not applicable: from the list of the top 20, several banks did not survive the 2014–2015 crisis and went bankrupt.
Therefore, you should not make a decision, focusing solely on the scale of the bank. Of course, there are large banks in the market with good financial indicators (as a rule, these are financial institutions with foreign capital), but the yield on bank deposits is very low. And because it is not interesting for many investors, for whom a bank deposit is a source of additional income.
Today, many depositors in the market choose the strategy, which I conditionally call “200 minus” – to place in one bank, regardless of its size and financial condition, a deposit of less than 200,000 in order to receive all their savings from the Deposit Guarantee Fund in case of bank failure. . The strategy in the existing conditions is definitely the right one. But, as the example of Mikhailovsky Bank shows, in this case it is also necessary to at least carefully read the deposit agreement and understand that you are signing the agreement with the bank, and not with some dubious financial company.