EBRD and Ukraine agree on steps to transform Oschadbank for its further privatization

EBRD and Ukraine agree on steps to transform Oschadbank for its further privatization

EBRD and Ukraine agree on steps to transform major state-owned bank Oschadbank for its further privatization and joining to EBRD’s trade finance programme

The European Bank for Reconstruction and Development (EBRD) and the government of Ukraine have agreed on steps to support reforms at the country’s largest state-owned bank PJSC Savings Bank of Ukraine (Oschadbank). The agreement is part of a wider effort aimed at reforming state-owned financial institutions and involving the EBRD as well as other international financial institutions (IFIs).

A Memorandum of Understanding (MoU) was signed by Oleksander Danyluyk, Ukraine’s Finance Minister; Andriy Pyshnyy, Chairman of the Board of Oschadbank; and Francis Malige, EBRD Managing Director for Eastern Europe and the Caucasus. The MoU pledges support to Oschadbank in preparation and implementation of a comprehensive programme aimed at its commercialisation and partial privatisation scheduled for 2018. The EBRD’s engagement may also result in the Bank making an equity investment in Oschadbank subject to the latter achieving key transformational milestones outlined in the MoU.

The strategic partnership provides for concrete measures designed not only to support Oschadbank’s further commercialisation but to improve corporate governance and transfer of banking know-how, which will be supported by technical assistance from the EBRD’s Shareholder Special Fund.

As a first step, the EBRD will bring Oschadbank into its Trade Facilitation Programme (TFP), providing guarantees of up to €50 million in support of Ukrainian exporters and importers. The EBRD's TFP promotes foreign trade to, from and within the EBRD’s countries of operations, including Ukraine. Under the programme, the Bank provides guarantees to international confirming banks, taking on the political and commercial payment risk of international trade transactions undertaken by banks in its countries of operations.

In a parallel effort, the EBRD will support Oschadbank with a comprehensive technical cooperation package which will focus on strengthening its capacity for micro- and small business lending and increasing the operational efficiency of its branch network.

The EBRD’s Francis Malige said: “The EBRD is committed to supporting fundamental reforms in Ukraine’s banking sector initiated by the government. In this respect, today’s MoU is a very promising development and will hopefully help the country’s major financial institution with a client base of 5.6 million retail customers become commercially sustainable and competitive, both externally and domestically. We take a note of positive changes in Oschadbank and will be happy to provide our resources and knowledge to facilitate a privatisation of Oschadbank in line with the best international practice. Its success will be a powerful signal, both for the sector and for international investors.”

Minister of Finance of Ukraine Alexander Danyluk, said: “The Memorandum between the Government, Oschadbank and the EBRD is part of the reform of state-owned banks (SOBs) pursued by the Ministry of Finance with the support of the EBRD and other international partners. Our main goal is to make SOBs efficient and transparent. It would mean better services for customers and billions of taxpayers' hryvnyas saved annually on additional capitalisation of SOBs. The State will use these savings for the development of the economy.  The signing of the Memorandum is the first step at which the parties agree on their further intentions and steps.  The necessary future steps will include the approval of the draft law on changes in the corporate governance of SOBs by the Government and its adoption by the Parliament, the establishment of new Supervisory Boards including independent directors and representatives of the State, as well as the improvement of internal processes and efficiency of SOB management.  The signing of the Memorandum is a positive signal for international investors and a strong confirmation that Oschadbank is changing.  It will also have a positive effect on the bank's value.  I sincerely thank the Oschadbank, EBRD and Ministry of Finance teams for their fruitful work on this project”.

Andriy Pyshnyy, Chairman of the Board of Oschadbank, said: “Over the past two years, Oschadbank has been modernising its largest and oldest network of branches in the country. This state-owned bank has an enormous commercial potential and in order to unlock it we have done a significant amount of preparatory work, including the introduction of a full-scale retail business, the launch of micro- and medium-sized business lending, and ensuring our financial reporting and risk management procedures are in line with international standards, as well as reforming our procurement system. Today’s event is undoubtedly a historic step in Oschadbank’s transformation. The decision to begin a cooperation with the EBRD has been preceded by joint preparatory work, which included an in-depth diagnostics of Oschadbank’s financial state. This cooperation is a strong message to all Oschadbank clients. We want them to know that we are transforming our bank in close cooperation with a powerful international investor.”

The EBRD is the largest international financial investor in Ukraine. To date, the Bank has made a cumulative commitment of almost €12 billion through 369 projects since the start of its operations in the country in 1993.

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