IMF-Conditioned Bank Bail-in in Ukraine
May Be Imminent
March 2014
March 14th, 2014 — The IMF may be preparing to force a "bail-in" of bondholders by Ukraine banks — one which could escalate to depositors — and strong country- and bank-bond sell-offs and depositors' runs are already reported underway at Ukraine local banks and branches of Russian banks in Ukraine.
According to International Business Finance: "Last Tuesday, an IMF mission started a 10-day visit to the country to thrash out the details of a possible plan. The following day Ukraine's acting finance minister, Oleksander Shlapak, said a debt restructuring was a possibility, sparking a sell-off in the country's bonds."
This has to do with Ukrainian government bonds; the IMF's new policy is to insist on bail-in "haircuts" of bondholders if it gives "assistance" in return for austerity. Britain and Germany may be demanding that, for political reasons, it not do so here AND NOW (i.e., that IMF allow a full bailout of government debt held by banks).
BUT "the country may be persuaded to attempt such a bail-in since the most recently issued Eurobond offering, a US$3bn instrument entirely bought by Russia last December, gives holders the right to accelerate should Ukraine's debt-to-GDP breach 60%, as would happen under a softer bailout." In other words, a full IMF bailout of Ukraine government debt would allow Russia to collect on that debt; a "bail-in" would not.
This bail-in prospect, since local and Russian banks hold Ukraine debt, is causing those banks' bonds to skyrocket in interest-rate yield, and threatening that insolvencies will break out. The banks will bail-in bondholders but perhaps depositors as well, and there are plenty of photographs of long lines — runs — outside these banks now.
From "After Ukraine's EU Refusal: Eurasian Development vs. Collapse and Chaos", EIR, Dec. 6, 2013 (PDF) HTML FIGURE 1 Source (in Russian): http://www.idmrr.ru/downloads/doklad_siberia_ver.5.97.pdf.
Rather than the European Union’s free-trade looting, Russia’s anti-drug chief Victor Ivanov
proposes alternative economic development to counter the drug plague in Afghanistan, and
transform greater expanses of Eurasia. This map comes from the 2013 report “How Southwest
Siberia Can Become an Economic Center of the Planet,” issued by the Institute for Migration, Demography and Regional Development (Moscow), which presents the alternative development concept in detail. The schematic shows primary industrialization (1) for Afghanistan, secondary industrialization (2) for the nations of Central Asia, and tertiary industrial modernization (3) in Russia. The graph at the upper left compares these three levels, shown bottom to top, in terms of time or industrial epoch on the y axis and complexity on the x axis. The development zone envisioned here extends from the science-center cities of Siberia to the Persian Gulf, encompassing Iran as well as Afghanistan and Central Asia. |
