KIEV: Ukraine on Sunday nationalised the country’s biggest bank in a bid to avert a financial meltdown in the war-scarred former Soviet state.
The government moved to take over PrivatBank after months of rumours that the lender was heavily burdened by bad debts.
PrivatBank controls one-third of the east European country’s deposits and even has branches in the Baltic States.
The Ukrainian government said in a statement that it was now the “100 percent owner of PrivatBank and guarantees the uninterrupted functioning of this institution and the safety of its clients’ money.”
Kiev’s decision falls in line with International Monetary Fund’s demand for Ukraine to clean up and stabilise its murky financial sector in order to achieve sustainable growth.
It was owned by Igor Kolomoyskiy — a politically powerful billionaire who became an early target of Ukrainian President Petro Poroshenko’s uphill fight against corruption.
The bank has also been the subject of local media reports suggesting it issued loans to select insiders that may never be repaid.
That talk alone saw the value of PrivatBank’s bonds fall by nearly 50 percent in late November.
Ukraine’s central bank had wanted Kolomoyskiy to refinance his bank with billions of dollars if he wanted to keep it.
But that money never emerged and Kiev’s patience snapped on Sunday.
Oleksandr Savchenko, head of Kiev’s International Institute of Business, told the Kyiv Post English-language weekly that Ukraine’s banking system would have been left in tatters were PrivatBank to close.
“Other banks would not be getting their loans back from PrivatBank, a series of bankruptcies would begin, and there would be panic,” Savchenko was quoted as saying.
“Re-launching the system would take around one or two months; the loss to GDP would be around two to three percent.”
Dragon Capital economist Sergiy Fursa said that “80 to 90 percent of PrivatBank’s loans were to institutions” controlled by Kolomoyskiy himself.
“This was insider lending — in other words, money was withdrawn by its owners from the bank.”
PrivatBank itself called the government’s decision a consequence of “media attacks” led by political insiders who opposed Kolomoyskiy.
“The decision to voluntarily and peacefully hand over the bank to the government was taken at the very moment that we understood that these media attacks — which we could survive — could endanger our clients,” its IT director wrote on Facebook.
PrivatBank deputy CEO Oleg Gorokhovskiy said the most important thing was that Ukrainians’ money was still safe.
“The bank will continue working, just as it did before.”
Kolomoyskiy himself issued no immediate comment.
Yet he has fought furious battles with Poroshenko and could now possibly enter into formal opposition to the government of the politically unstable state.