The Cabinet of Ministers of Ukraine has approved the additional capitalization of the state-run Oschadbank (The Savings Bank of Ukraine) to the tune of $205 million. The decision was made by the government during its meeting in Kyiv on Wednesday, Interfax-Ukraine reports.
According to the Cabinet’s decision, the bank will carry out an additional emission of 4,957 thousand shares with the current par value - $41,384.
As reported earlier, on 18 December 2017 the National Bank of Ukraine announced that the quality of Oschadbank’s and UkrExImBank’s credit portfolios has worsened and that the need for additional capitalization of the institutions was being considered. According to the central bank’s data, particularly the quality of loans issued to large business groups has decreased and the collateral used to finance these loans has significantly depreciated.
The following day, the Ministry of Finance confirmed this information and stated that the amount of additional capitalization required will be determined after consultations with the National Bank.
The emission of internal government bonds for additional capitalization of state-run banks is the largest contributor to the quasi-fiscal deficit. In the 11 months of 2017, the government has spent $1.75 billion on this issue, which constitutes 1.7% of Ukraine GDP.
According to the National Bank’s data, the total registered capital of the banking sector has increased by $1.95 billion or 13.7%. The main contributing factor was the additional capitalization of state-run banks, which accounted for $1.57 billion.
At the same time, the regulatory capital has grown by $349.65 million or 9%. “Its growth is lower than that of the registered capital as a result of large banks admitting credit risk,”- the National Bank explained.