Ukraine declared the country’s largest lender PrivatBank insolvent on Monday and said bringing it under state ownership was the only way to protect the money of 20 million Ukrainian clients and stave off threats to the financial system.
KIEV Ukraine declared the country’s largest lender PrivatBank insolvent on Monday and said bringing it under state ownership was the only way to protect the money of 20 million Ukrainian clients and stave off threats to the financial system.
The central bank said in a statement that PrivatBank had not fulfilled its recapitalization program and 97 percent of its corporate loans had gone to companies linked to the bank’s shareholders. As of Dec. 1, the bank’s capital shortfall stood at 148 billion hryvnia ($5.65 billion).
“We are sure that moving the bank into state ownership is the only possible way to save the money of the bank’s clients and to save the financial system,” the central bank said in a statement.
The central bank said that Ukraine was ready to support PrivatBank with liquidity if needed, adding that it did not see the nationalization process as significantly impacting the currency market or inflation levels.
PrivatBank’s former shareholders had agreed to restructure loans paid to insiders by July 1 next year, the central bank said, while the finance minister said the bank would be sold once it was back on its feet.
Under Western-backed banking reforms, Ukraine is meant to shut lenders that cannot meet capitalization targets, but PrivatBank is considered too big to fail.
The nationalization comes just days before parliament has to vote on next year’s budget, which must stick to a shortfall of 3 percent of economic output, as agreed with Ukraine’s international backers.
($1 = 26.2100 hryvnias)
(Reporting by Natalia Zinets and Pavel Polityuk- Writing by Matthias Williams- Editing by Louise Heavens)
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