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Понеділок, 19 12 2016 15:48

NATIONALIZED UKRAINIAN LENDER PRIVATBANK HAS $5.6 BILLION HOLE IN BALANCE SHEET

Laura Mills from Moscow, The Wall Street Journal, 19.12.2016   
 

Ukrainian government said the move to nationalize Privatbank was necessary to prevent a financial meltdown

 

Nationalized Ukrainian lender Privatbank has a 148 billion hryvnia ($5.6 billion) hole in its balance sheet, the country’s central bank governor said Monday.  

 

Valeria Gontareva said in a televised briefing that “for almost a year the bank didn't carry out mandatory norms of reserves.” She said that lending to companies related to the bank’s shareholders amounted to 97% of its loan portfolio.  

 

Ms. Gontareva and Ukraine’s Finance Minister Oleksandr Danylyuk urged calm and said depositors’ money was safe. The bank would be fully supported and given necessary liquidity by the National Bank, Ms. Gontareva said.

 

The government said the move to nationalize Privatbank, Ukraine’s largest private lender which holds a third of the country’s total deposits and handles about 75% of all payment transactions, was necessary to prevent a financial meltdown in the country.  

 

Mr. Danylyuk also said that the move was supported by Ukraine’s international partners, and would help speed up the delivery of another tranche from the International Monetary Fund, which has pledged a $17.5 billion bailout program after the country was buffeted by a conflict with Russia-backed separatists and the collapse of its currency. 

 

Privatbank is controlled by tycoon Ihor Kolomoisky, who bankrolled armed formations supporting the Ukrainian military in its fight against Russia-backed separatists and who owns one of Ukraine’s most popular television channels. 

 

Many market observers believed that Privatbank’s size and Mr. Kolomoisky’s political weight allowed the bank to play by different rules, enabling the bank to skirt new regulations amid an overhaul of the banking sector. Ukraine’s National Bank has shut down more than 80 banks in the past two years, including Ukraine’s second-largest private lender Delta Bank.

 

Dmytro Dubilet, deputy manager of Privatbank’s management board, wrote on his Facebook page that the takeover was “surprising news.” 

 

He said that the bank had suffered a wave of what he described as informational attacks. He said recent rumors that sent depositors rushing to withdraw cash had provided a fatal blow, making the “voluntary and peaceful handover of the bank to state ownership” the only option for management. He said deposits were safe and would be guaranteed by the state. 

 

But for a country where bank runs are far from a thing of the past, the transition to state ownership is riddled with risk. 

 

Oleg Grokhovsky, first deputy chairman of Privatbank’s board, wrote on Facebook that depositors had withdrawn more than 2 billion hryvnia a day last week, far higher than previous records of 1.5 billion hryvnia a day, he said.

 

Chief Executive Oleksandr Dubilet couldn't be immediately reached for comment.

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