Ukraine leader urges calm af­ter big bank na­tion­al­ized

Got seeks to avert rapid fi­nan­cial melt­down

Kuwait Times - - BUSINESS -

KIEV: Ukrainian Pres­i­dent Petro Poroshenko urged peo­ple not to panic yes­ter­day af­ter his gov­ern­ment na­tion­al­ized the coun­try’s largest pri­vate bank to try and avoid a rapid fi­nan­cial melt­down. The for­mer Soviet repub­lic’s cabi­net on Sun­day took over Pri­vatBank-a lender that held one-third of Ukraini­ans’ sav­ings and had branches in the Baltic states.

The bank was owned by Poroshenko’s po­lit­i­cal foe Igor Kolo­moyskiy. The bil­lion­aire was re­port­edly heav­ily bur­dened by debt be­cause of du­bi­ous loans the lender made to his cronies. Kiev’s de­ci­sion falls in line with the In­ter­na­tional Mon­e­tary Fund’s de­mand for Ukraine to clean up and sta­bilise its murky fi­nan­cial sec­tor and seek sus­tain­able growth.

The IMF wel­comed the gov­ern­ment’s ac­tion. But the na­tion­al­iza­tion has cre­ated public un­ease about peo­ple’s hold­ings and whether the coun­try might en­ter an­other eco­nomic cri­sis sim­i­lar to when Rus­sia an­nexed Ukraine’s Crimea penin­sula in March 2014.

A sub­se­quent 31-month war with pro-Rus­sia in­sur­gents in the sep­a­ratist east claimed nearly 10,000 lives and seen the econ­omy shrink by about 17 per­cent in 2014-15. In­fla­tion soared to just un­der 50 per­cent last year. Poroshenko, a pro-West­ern leader, said in a state­ment that the sit­u­a­tion was un­der his full con­trol.

“I ap­peal to you, dear Pri­vatBank clients-keep calm,” he said. “The new (state) ad­min­is­tra­tion is al­ready tak­ing over the levers of power right now, this very hour and minute.”

IMF heaps praise

Ukraine’s cen­tral bank had wanted Kolo­moyskiy to re­fi­nance his bank with bil­lions of dol­lars if he wanted to re­main its owner. There were fears that Pri­vatBank’s fall could have ig­nited a wider cri­sis in the fi­nan­cial sys­tem akin to the tur­bu­lence in the United States in 2008.

But the ty­coon never came up with the money and Kiev’s pa­tience snapped on Sun­day.

Fi­nance Min­is­ter Olek­sandr Dany­luk said the gov­ern­ment’s de­ci­sion “will help pre­serve the sav­ings of nearly 20 mil­lion Pri­vatBank clients”. “All of our in­ter­na­tional part­ners sup­port this move, in­clud­ing the In­ter­na­tional Mon­e­tary Fund (IMF), the Euro­pean Bank for Re­con­struc­tion and Devel­op­ment, as well as the gov­ern­ment of the United States,” the fi­nance min­is­ter said. IMF chief Chris­tine La­garde hailed the Ukrainian gov­ern­ment’s ac­tions as “an im­por­tant step in their ef­forts to safe­guard fi­nan­cial sta­bil­ity”. “This de­ci­sion was taken to en­sure the smooth op­er­a­tions of the bank given its sys­temic role in Ukraine’s fi­nan­cial sys­tem,” La­garde said in a state­ment. Ukrainian Cen­tral Bank chief Va­le­ria Gontareva told re­porters that Pri­vatBank had mis­er­ably failed a se­ries of stress tests and was in a $4.2-bil­lion (4.0-bil­lion-euro) hole in April 2015. She said 97 per­cent of the bank’s loans at the time had been is­sued by

Kolo­moyskiy to his busi­ness part­ners who might either have not paid them back or had done so on pref­er­en­tial con­di­tions. Gontareva said the bank’s debts grew to $5.6 bil­lion by De­cem­ber 1. Kolo­moyskiy him­self has yet to com­ment. But one Pri­vatBank man­ager on Sun­day called the gov­ern­ment’s de­ci­sion a con­se­quence of “me­dia at­tacks” led by po­lit­i­cal power­bro­kers 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,” its IT di­rec­tor wrote on Facebook.

But some po­lit­i­cal an­a­lysts hailed the gov­ern­ment’s step as an over­due show of power over ty­coons who have wielded out­sized in­flu­ence in cor­rup­tion-rid­dled Ukraine for decades.

“This may have been the very first time that the Ukrainian gov­ern­ment took an ac­tual hard de­ci­sion,” Dragon Cap­i­tal in­vest­ment bank’s econ­o­mist Sergiy Fursa wrote on Facebook. “Na­tion­al­iza­tion is a bad de­ci­sion,” he said. “But it is bet­ter than all the other al­ter­na­tives.” — AFP

— AFP

KIEV: Clients walk out the of­fice of the Pri­vatBank in the cen­ter of Kiev yes­ter­day.

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