What does PrivatBank nationalization mean to Ukrainians and state?

Author : News Agency

Source :

In the evening on December 18 Cabinet of Ministers supported the nationalization of Privatbank. This means that the state represented by Ministry of Finance became owner of 100% shares of the bank. NBU said that yesterday the largest bank in the country was classified as insolvent. The regulator says that nationalization - is the only way to save the money of depositors and the financial system of the country
22:30, 19 December 2016

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For a long time we heard rumors regarding PrivatBank nationalization, but the financial institution regularly denied this in its messages. Just a week ago the panic intensified, the Ukrainians began to actively withdraw cash. Media reported that the main shareholder - Igor Kolomoisky - agreed to transfer bank to the state. On Sunday appeared reports on the National Security Council meeting, and later the Cabinet at another meeting will take a decision on the bank. When it became known that Prime Minister Volodymyr Groysman canceled his visit to Brussels on December 19 it was already clear that something was going to happen. And late in the evening the press service of the Cabinet of Ministers published information on the nationalization of Privatbank.

What are the problems of PrivatBank?

NBU said that three things led to such a situation: the crisis in the Ukrainian economy, bad credit policy of the bank and the lack of capital. Thus, according to Gontareva, more than 97% of the corporate portfolio, which amounted to 150 billion USD as of April 1, 2015 were loans related to joint-stock companies. The bank's management made a plan of capitalization and a program to reduce the associated credit, but then it was not done.

As of December 1, 2016 the lack of capital in PrivatBank has grown to 148 billion USD, and the bank's liquidity has declined substantially. According to the NBU, the bank almost for a year had not fulfilled norms of compulsory reservation and outstanding debt to the bank regulator on stabilization loans amounted to UAH 14 billion for a total debt of 19 billion UAH.

How to save the bank?

The Ministry of Finance stated that the elimination of the deficit of bank capital will take place in several stages. The exact amount of additional capitalization will be determined by the results of the audit. At the first stage the Ministry of Finance will issue bonds in the amount of 43 billion UAH. According to the minister Olexandr Danyliuk, the maximum amount of additional capitalization will be 148 billion UAH and the minimum - 116.8 billion UAH.

Who are the customers of PrivatBank?

According to NBU, these are 20 million of Ukrainians. In particular, 3.2 million of pensioners, more than 500 thousand of students, 1.6 million of other socially vulnerable groups. According to the GFK Ukraine survey, in the third quarter of 2016 the bank customers were 51.4% of Ukrainians - individuals older than 16 years.

What will happen to the branches, ATMs and POS terminals?

Now all branches are working in a usual mode, ATMs and terminals - as well. NBU said that customers have free access to their current accounts and deposits. In fact, there are queues near ATMs and branches.

What restrictions have been already introduced?

At the moment, there is one limitation. So, for 19 December PrivatBank have suspended services for corporate clients. Gontareva said that this is due to purely technical matters.

Can the state eliminate PrivateBank?

Probably not. The bank is too big, and also the Ministry of Finance voiced a very interesting proposal. So, after the bank will completely stabilized, the state will sell it.

Who will lead the bank?

According to the President Petro Poroshenko, a group of experts had been already hired for this purpose, and the European Bank for Reconstruction and Development also joined their formation. PrivatBank states that the new Chairman of the Board, is former Finance Minister Oleksandr Shlapak.

What will happen to unpaid loans?

They must be returned. Bank will repay the debt in accordance with the terms of the loans agreements.

Related: How to go through Privatbank nationalization

Related: If World Bank or EBRD joined the capitalization of "Privatbank", it would be great, - Groysman

Related: PrivatBank nationalization will make Ukraine's banking sector stronger and more flexible, - G7

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