Expat Talks: Should You Get A Ukrainian Bank
The Ukrainian bank system gets a bad reputation among some of the expat community, while others swear you could not survive without an account in a local bank. We are looking at both sides of the argument to help you make the best decision possible!
Why The Lack Of Confidence?
Foreigners and locals alike tend to mistrust Ukrainian banks. You would hear of people keeping their entire life’s savings under the mattress out of fear of losing them if they go to a bank.
Much like other former Soviet countries, Ukraine doesn’t have the strongest laws governing the bank system. Poor governing practices are common, even among the largest banks in the country. While their marketing strategies may be aggressive enough to convince you, the average Ukrainian bank has a quite poor loan portfolio.
This is why, if you do decide to get an account in the country, it’s best to stick to foreign banks.
An Overview Of The Ukrainian Bank System
There is nothing too unusual here. The bank system has a two-tier structure with a National Bank (the NBU) and various commercial banks.
The National Bank of Ukraine is responsible for:
- Maintaining the state’s currency stable.
- Regulating interest rates.
- Managing the money supply.
- Overseeing the commercial banks.
In other words, the National Bank = a central bank. Since it’s the only institution that prints money, the Ukrainian central bank is solely responsible for any issues caused by increasing the monetary base in the state.
The NBU also issues licenses to commercial banks. There are two types of commercial banks under Ukrainian law:
- The “universal” commercial banks
- “Specialized” commercial banks – these can be savings, investment, mortgage, settlement clearing etc.
As of mid-2017, the state owns over 50% of the total banking assets. Foreign capital represents 26% while private locally-owned banking assets are around 13%.
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Why Your Choice Of Bank Matters
Ukraine’s economy is not stable. Even large banks have become insolvent and the instability in the bank system doesn’t seem to get better.
Here is what could go wrong if you pick a Ukrainian bank at random:
- Issues with normal day-to-day operations.
- Large delays in payments to and from other parties.
- Majorly frustrating interactions with the bank’s staff.
- Losses due to insolvency (once again: it happens more often than you think)
Since at the moment, the central bank is not managing to stabilize the situation, you are going to have to be extra financially savvy when choosing your bank.
The other option, of course, is living without a bank account or simply using your foreign account. While this is not always possible, I highly recommend you make ‘no Ukrainian bank’ your top choice if you think you can survive without it. Which brings me to:
Why Do You Even Need A Bank Account?
People assume a bank account is a must, but that’s not really the case. Here are the main perks of a bank account (in general, not necessarily in Ukraine):
- Up to a certain amount, they will be insured (i.e. against robbery).
- Earn interest on the money you deposit (although it’s usually below the inflation rate, meaning that you’re not actually earning a lot).
- Makes managing money easier, especially if you use online banking.
- You can send and receive money to and from other people (because mailing money is not only unsafe, in many countries, it’s actually illegal).
- Borrowing money is easiest through a bank.
Living without these commodities may seem like an unnecessary inconvenience. Since there is so much distrust in the Ukraine banking system, though, you would find living without a bank account a lot easier than it would be in the West. Paying in cash is not seen as ridiculous or suspicious. You could get your paycheck as a physical amount of money. Keeping your savings under the mattress is not reserved for paranoid grannies only (though most people don’t actually keep the money there).
Ultimately, though, the question is not even “Could I live without a bank account?” it is “Could I live without a Ukrainian bank account?” And the answer is defintely yes.
Ukrainian Bank Account Options For Expats
You wouldn’t think of opening a bank account for a simple vacation. As high as the fees for withdrawing money in the local currency may be, you’d hardly go broke in a couple of days. Expats usually don’t even think about a local bank account in the first couple of weeks.
Of course, if you have a Ukrainian job, you’d be encouraged to open an account before you even start. Remember you could easily say no and ask to receive your monthly pay in an old school fashion.
There are six main options for expats, who plan on relocating permanently:
- A local bank account
- An international bank account that lets you manage foreign currency quickly and less expensively.
- Keeping their original bank account
- Opening an offshore bank account in a place where different tax rules apply.
- A comnination of the last four.
- Chossing to live the eccentric life of a person with no bank account whatsoever.
While a local bank account may contribute to your feeling that you “belong”, it comes at a price. Apart from the bank instability, you should also consider the language barrier. You will receive most (if not all) documents in Ukrainian. Communicating with your bank might be more difficult. Opening the account and essentially all operations from then on will take longer for you since you don’t speak the language.
What Is An International Bank Account?
Nomad-friendly accounts are popping up in banks throughout the world. If you are not a frequent traveler, the 3-5% fees on transactions, the ATM fees, and the outrageous exchange rates don’t make a big difference. As a digital nomad, a frequent traveler, or a simply an expat in a country with poor bank stability, these could add up. In come the international bank account options.
An international bank account is specifically designed with long-term travelers in mind. It allows you to manage foreign currency for cheap and a lot quicker. Depending on your account, there are even options with no monthly fees, 0% foreign transaction fees, 0% currency exchange markup. Some wouldn’t even charge you for using the ATM and refund any fees the ATM owner might have imposed. Sounds like a dream? Well, it is possible.
Research your local options to discover what’s best for you. In the US, Charles Schwab Bank offers a pretty decent nomad-friendly package. Remember that you still need to be a US resident. As long as you have an address in the States, you will be fine, however, if you don’t, your account may be subject to closure. The way around this is a mail scanning and forwarding service. These operate for a monthly fee and give you a street address where you’d receive all the documents from your bank.
But What If I Must Get A Ukrainian Bank Account?
There are some cases where a local account is inevitable. You will have to shop around for the best option but getting a Ukrainian bank account safely is not mission impossible.
First and above all, you’d have to judge the bank’s financial situation. Whether you financially savvy or just learning about this stuff, it is essential that you put some effort into it. Going for a foreign bank is the first step here. While a foreign-capital commercial bank could go insolvent, the chances are much slimmer than they would be for a truly local bank.
According to Forinsurer magazine in Ukraine, the three most reliable banks in the country are, as follows:
- Credit Agricole Bank
- Reiffeisen Bank Aval
These are all foreign capital commercial banks. Credit Agricole is French, Credobank is Polish and Reiffeisen operates with Austrian capital. You have a couple of state-owned banks in the top 15 and you also have some local commercial banks. For the most part, though, it’s foreign capital banks which makes sense considering how unstable Ukraine’s economy is right now.
Of course, just because one magazine rated them this way, it doesn’t mean they are the best choice for you. A lot goes into choosing a bank and the exact package you are going to use. Investopedia have an awesomely comprehensive article on it. Banks are actually obliged to publish a lot of information. While it’s not realistic to go through all of it (not to mention it can be near impossible to understand), try to get a Ukrainian friend on board to tell you about the basics.
When the time to sign a contract comes, you can ask for one in your native language (or in English). It will likely take some time and staff will frown at you but you’d have to insist. Nobody can force you to sign something you literally don’t understand. Arm yourself with all the patience you have, take a day off, and go get it done!
Do you agree with our thoughts on the Ukrainian bank system and the account options for expats? Or maybe you have a question we could answer (even as non-financial gurus)? Share your thoughts, questions, and opinions in the comments below! Happy Ukrainian adventures!