Ukraine on Sunday nationalized the nation’s biggest bank in a bid to avert a financial meltdown in the war-scarred country.
The government took over PrivatBank after months of rumors that the lender was heavily burdened by bad debts.
PrivatBank controls one-third of Ukraine’s deposits and 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 the institution and the safety of its clients’ money.”
Kiev’s decision falls in line with the IMF’s demand for Ukraine to clean up and stabilize its murky financial sector to achieve sustainable growth.
The bank was owned by Igor Kolomoyskiy — a politically influential 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 might never be repaid.
That talk alone saw the value of PrivatBank’s bonds fall by about 50 percent late last month.
Ukraine’s central bank had asked Kolomoyskiy to refinance his bank with billions of US dollars if he wanted to keep it.
However, the money never emerged and Kiev’s patience snapped on Sunday.
Oleksandr Savchenko, head of Kiev’s International Institute of Business, told the English-language weekly Kyiv Post that Ukraine’s banking system would have been left in tatters if PrivatBank were 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. “Relaunching the system would take about one or two months; the loss to GDP would be about 2 to 3 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“This was insider lending — in other words, money was withdrawn by its owners from the bank,” Fursa said.
PrivatBank 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,” the bank’s IT director wrote on Facebook.
PrivatBank deputy chief executive officer Oleg Gorokhovskiy said the most important thing was that Ukrainians’ money was still safe.
“The bank will continue working, just as it did before,” Gorokhovskiy said.
Kolomoyskiy was not immediately available for comments.
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