Ukraine leader urges calm after big bank nationalized
Got seeks to avert rapid financial meltdown
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
KIEV: Clients walk out the office of the PrivatBank in the center of Kiev yesterday.