Privatbank owners Igor Kolomoyskiy and Gennadiy Bogoliubov will give up its ownership rights for Privatbank in favor of the state for whole stake of 100%. The new CEO of the bank will be Alexander Shlapak, the former Minister of Finance in Ukraine.
The decision was based on financing needs for UAH 146bn, which could be channeled from the state budget in current economic situation. At this, customers of the bank started to withdraw their funds from the bank amounting to daily UAH 2bn during the week prior to the nationalization deal of the largest bank in Ukraine in terms of assets. In the meantime, the uncovered capital risk might stand at UAH 85.4bn – UAH 96.6bn for the bank. The charter capital of the bank amounted to UAH 21.26bn in Q3/2016; the major shareholders were Igor Kolomoyskiy - 49.9816% stake, and Gennadiy Bogoliubov - 41,5769%. After entering into ownership, the state authorities will issue additional shares which the Ministry of Finance of Ukraine will buy out in exchange of state domestic bonds maturing in 30-years to the tune of UAH 116bn. The capitalization of the bank will be longer in time and at the first place the state will inject smaller amounts. Upon receiving the funds, Privatbank will also have a right to sell the bonds to the NBU or other banks. To speed up the process, the NBU named Privatbank as insolvent and Deposit Guarantee Fund of Ukraine introduced its temporary administration. At this, the payments via the bank will not be frozen as it is normally the case with temporary administration, as 50% of domestic payments have been transacted with Privatbank. Also, the temporary administration will probably not manage long, as customers bear negative connotation with it and abstain from such banks. In its turn, the state authorities believe that nationalization of Privatbank will help to receive IMF funds. Also, the bank can be sold to some private investors later too.
The European Bank for Reconstruction and Development (EBRD) supports the decision of Ukrainian government to nationalize the largest bank in order to protect private and legal entities who are the customers of the bank. EBRD President Sir Suma Chakrabarti said: “The long-term stability of PrivatBank, the largest bank in Ukraine, is crucial to the country’s economic health. We believe the decision to nationalise it is the right one and have offered our expertise to the authorities whenever it is needed.
“We strongly support the National Bank’s continuing efforts to reform the banking system in Ukraine and ensure good governance across the industry.”
Francis Malige, EBRD Managing Director for Eastern Europe and the Caucasus, said: “A systemic bank of this magnitude could not be allowed to fail. Nationalisation of systemic banks allowed many developed countries protect their economies during the global financial crisis and it is the right way forward for Ukraine now.”, the EBRD website reads.
The EBRD has also advised the government and the National Bank of Ukraine on policy and regulation issues relating to banking system reform. The EBRD is the largest institutional investor in Ukraine and has provided debt and capital financing for several Ukrainian banks during the crisis to support stability of the banking system.