Ukraine nationalizes largest bank after stability concerns

AP News
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Posted: Dec 19, 2016 8:17 AM
Ukraine nationalizes largest bank after stability concerns

MOSCOW (AP) — Ukraine is nationalizing its largest bank following concerns over its stability in a move welcomed by the International Monetary Fund and the European Union.

The Cabinet agreed late Sunday to move PrivatBank into full state ownership, saying the move was carried out "in close coordination with international financial organizations" and with the consent of PrivatBank's owners. It was an apparent reference to the oligarchs Ihor Kolomoisky and Hennady Boholyubov, who together control over 90 percent of the bank.

Ukrainian President Petro Poroshenko said in a statement Monday that the decision "saved both the bank and the banking system" in Ukraine because PrivatBank lacked capital and had been hit hard by the conflict in eastern Ukraine and the accompanying economic crash in 2014 and 2015.

"It is obvious that the only way to save the bank, and its customers' money, was to make it state property," Poroshenko said. "The alternative would appear irresponsible because it would mean closing our eyes, hiding our heads in the sand and waiting for the bank to fail."

Poroshenko said he had submitted a bill to the Ukrainian parliament pushing for additional deposit guarantees for the bank's customers. "I say to the customers of PrivatBank — remain calm," he said.

"Today's decision of Ukrainian authorities to nationalize PrivatBank is an important step in their efforts to safeguard financial stability," IMF president Christine Lagarde said in a statement.

"It is now important that the process of nationalization be followed by firm efforts to maximize the repayment of related-party loans, and the appointment of an independent management team to restore the bank's viability, minimizing the cost to the state and taxpayers in line with existing legislation and international best practice."

The EU's top foreign policy representative, Federica Mogherini, praised the "bold and courageous decision to nationalize PrivatBank," adding that it would strengthen regulation and help other EU-backed reforms.

There was no obvious sign of panic after the nationalization in the capital, Kiev, or of lengthy queues outside branches of Privatbank, which dominates Ukraine's retail banking sector. However, some PrivatBank ATMs have been short of cash in recent days.

PrivatBank and its owners have yet to comment. Last week, PrivatBank dismissed talk of nationalization as an "informational attack" aimed at destabilizing Ukrainian politics.

Over the last two years, the Ukrainian authorities have made a concerted effort to clean up the banking sector, closing dozens of so-called zombie banks. Many had been accused of involvement in money-laundering or related-party funding schemes, whereby people connected to the bank's management siphon off money via loans.

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Efrem Lukatsky in Kiev, Ukraine, and Raf Casert in Brussels, contributed to this report.