PrivatBank weaning: what it means for Ukraine and Petro Poroshenko


Night solution

To full nationalization of PrivatBank, the Ukraine government announced in the night from Sunday to Monday. As emphasized in the report of the Cabinet, this was done on the “recommendation of the Council of national security and defense” in order to “stabilize the financial system”.

“Private shareholders of PrivatBank approached the government with a proposal to the state for the benefit of customers of the Bank became the full owner of it”, reads the document.

The fate of the Bank Igor Kolomoisky, an influential Ukrainian oligarch, whose fortune is estimated at $2 billion, members of the Cabinet of Ministers decided at a meeting in the presidential administration of Ukraine.

Kolomoisky is the founder of the largest financial-industrial group “Privat” owned shares in the Bank at 41.6 per cent; another major shareholder is Gennady Bogolyubov, which accounts for 33.2 per cent.

That PrivatBank has problems, the head of the national Bank of Ukraine (NBU) Valeria Gontareva warned in early December. According to the report, the NBU cited resource “Strenia”, “PrivatBank”, the gap between the formed provisions according to IFRS and credit risk, was 96.6 billion (with equity of 30 billion UAH).

On 19 December in a televised address, Ukrainian President Petro Poroshenko explained that the government decided to offer shareholders the nationalization of “PrivatBank” to avoid the collapse of the institution which holds the money “about half the adult population of Ukraine”.

The impending nationalization “PrivatBank” written by many Ukrainian media, in particular, with reference to its own sources — “the Economic truth” (part of the holding “Ukrainian truth”).

In “PrivatBank” possible nationalization until recently denied. The first Deputy Chairman of PrivatBank Oleg Gorokhovsky on December 14th claimed that the rumors about the imminent nationalization — planned attack on the Bank.

Long war

Poroshenko bluntly accused the owners and management of “PrivatBank” in that by their actions they brought him to the crisis. “Shareholders have not found the resources for the mandatory recapitalization program. But the current business model, apparently, has exhausted itself,” said he, adding that it jeopardized “the entire banking system of Ukraine”.

Kolomoisky situation has not yet commented on. According to the edition “Ukrainian news”, a few days before the government’s decision on nationalization of businessman night met with Poroshenko.

According to Ukrainian political analyst Vadim Karasev, what happened — “surrender Kolomoisky, who is without any resources to keep the Bank and fight for him.” “For Poroshenko the year ends successfully. Kolomoisky Empire fell, he has no political resources to deal with the President. Previously, the impact of lost Firtash, so the field oligarchic Poroshenko has only one competitor — Rinat Akhmetov. However he had with the President a non-aggression Pact, since Akhmetov is still unofficial master of Donbass”, — said Karasev.

Open confrontation between Poroshenko and Kolomoisky began in 2015 when the result of the decision of the Verkhovna Rada under the control of the state returned the company “Ukrnafta” (42% of shares belonged to a business group Kolomoisky). In response PrivatBank has been blocked assets of Petro Poroshenko (as stated by management, due to technical failure). In March 2015 Kolomoisky, who by this time of the year led the Dnipropetrovsk oblast by the decree of the President was removed from this post.

In October 2015 one of the closest associates Kolomoisky and Gennady Korban was detained by the Ukrainian security services on suspicion of creating an organized criminal group, kidnapping and embezzlement of funds collected by the population to support the ATO. The Prosecutor General of the Republic also suspected led by Korban batch of “Dill”, which is Kolomoisky, in the money paid to MPs for the failure of the courts and public fights.

Aggravation

As a result of loss of “PrivatBank” Kolomoisky economic weight declines substantially, and if in the future he will lose the media holding “1+1 media”, it will be possible to say that Poroshenko has won an important victory — so commented the political analyst Volodymyr Fesenko. However, he noted that the nationalization was the result of the agreement of the authorities with Kolomoisky and the second leading shareholder of the Bank Gennady Bogolyubov. “The President controlled the process, a major role was played by the Prime Minister Vladimir Groysman and the leadership of the national Bank”, — said Fesenko.

Nationalization “PrivatBank” can lead to a further strengthening of the fight between the head of state and big business; perhaps even the formation of anti-presidential oligarchic coalition, warns Anatoly Oxitec, a senior analyst at the Ukrainian International center for policy studies. “Ukraine is entering a new period of political uncertainty. Despite the fact that the political season is closed, the story around “PrivatBank” and vote on the budget at the end of the year will lead to the fact that 2017 will start with a new configuration of political forces,” — said Artisyuk .

According to experts, the development of events depends on how the agreement was concluded at the “PrivatBank”. “If the deal was gentlemanly, things will go relatively smoothly, will continue the current situation “fermentation”, when the oligarchs will strengthen their positions in anticipation of a weakening Poroshenko, — said the analyst. — It can occur due to the deterioration of the socio-economic situation, problems in foreign policy.” The situation in Ukrainian politics Artisyuk calls the war of “all against all”, which involved forces inside the presidential administration and the ruling coalition. Such a struggle is possible because of the lack of an arbitrator, the President to be stopped, concluded the analyst.

Financial backup

Formally, the state buys “PrivatBank” from the owners for one hryvnia, told reporters the head of the NBU Gontareva. Depositors will not be affected, assured Ukrainians Poroshenko: “the State takes responsibility and guarantees to depositors of “Privat” the integrity and inviolability of their money.” He added, “submitted to the Verkhovna Rada a bill that gives additional guarantees of deposits of citizens in this institution.” According to Poroshenko, to the restoration of “PrivatBank”, the government will attract foreign specialists, including from the European Bank for reconstruction and development (EBRD).

The new Chairman of the Board of PrivatBank will be the former Minister of Finance of Ukraine Oleksandr Shlapak, wrote on his page in Facebook the Deputy Chairman of the management Board of the Bank Dmitry Dubilet. He noted that the age “should form a new team of top managers”. “Formally, the transition period during which we will introduce in a new team that will last several months,” said Dubilet.

According to the decision of the government, the government 100% owns the Bank. To solve the problems of the Bank will be issued 30-year bonds of internal state loan of 150 billion USD. The timing of issue and volume of packages is not yet known. Paper will buy the national Bank, and the funds will be at the capital of PrivatBank.

As reported at a briefing, Finance Minister Oleksandr danylyuk, after the stabilization of the Bank “to be sold”. He also stressed that the solution to the problems of PrivatBank will help the country to receive another tranche of international aid. “This decision is important in the framework of our cooperation with the IMF and after the next step is the adoption of the budget — we have completed two important phase of cooperation with the IMF. And it will also bring us closer to a tight cooperation with the IMF and receiving the next tranche,” — said the Minister.

Source