How to go through Privatbank nationalization

Author : Oleksandr Okhrimenko

Source :

In any case, the nationalization of PrivatBank means an increase of the share of state banks in the financial system of Ukraine
20:20, 19 December 2016

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PrivatBank nationalization - is more technical than social operation and is rather uninteresting for the bank's clients. If the authorities would do everything correctly and without errors, they shouldn’t even stop PrivatBank payments or just limit them for a short time. For example, customers’ card could be blocked for a few days, but this is only a temporary inconvenience. Thus, the bank's customers actually will not notice the change of the owner of the bank.

Moreover, Ukrainians usually pay a very little attention to who is the owner of the bank and what the head of the bank’s name is. So everything is in the hands of the National Bank of Ukraine and Ukrainian government - or rather, the Ministry of Finance of Ukraine. It is really possible to carry out nationalization, while all deposits and cards of PrivatBank will work normally during the nationalization, and after. We have a good example of the nationalization of Ukrgasbank, when the state has become the owner of the bank, but the bank still operates normally, and in general customers have not lost anything, and even happy with the change of ownership.

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

By law, the nationalization involves the following procedure. A temporary administration should be introduced in Privatbank. And now there are three ways. The first way: the Ministry of Finance of Ukraine buys PrivatBank shares from the owners of the Bank for cash, in other words - the money of state budget. But it is rather unlikely way, though it is possible by law. The second way: the Ministry of Finance of Ukraine issues the government bonds - "the bonds of domestic government loan". At the same time it exchanges the owners’ PrivatBank shares on government bonds. But these government bonds can be redeemed only in 25-30 years and there are very low interest rates on them. As a result, if the owner is willing to sell such bonds, he can do it only at a large discount. This is the most possible path.

The third way: the temporary administrator cancels the issue of Privatbank dhares, and the Ministry of Finance makes the issue of government bonds and submits them to the bank's capital. In this case, the owners of PrivatBank receive nothing for the bank. It is also possible way. In this case, the "income" of PrivatBank owners is - shifting of the bank debts to the state. Now the NBU and Finance Ministry will have to think about how to ensure repayment of problem loans, deposits and how to repay foreign debts. As you can see, there are few options, which of them will be used, only time will tell.

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

In any case, the nationalization of PrivatBank means an increase in the share of state banks in the financial system of Ukraine. Now, under the supervision of the Ministry of Finance, and more precisely - under the supervision of the President of Ukraine will be about 53% of Ukrainian banking system assets. It strengthens state control over the financial market of Ukraine and, in fact, returns Ukraine in the time of the beginning of the 90s, when the main banks in Ukraine were state-owned banks.

So in this case it is more political than an economic event. Although for the population of Ukraine as a whole it does not matter, it is a public or a private bank. As a rule, Ukrainians are more interested in the stability of the banking sector. We hope that this is the latest saga in the banking sector of Ukraine, and after that we would not be the witnesses of repartition of the Ukrainian banking sector. As a result, and thus case would be history, and Ukrainians will calm down and will no longer panic, but on the contrary - will carry the money to the bank.

While we first need to go through the nationalization of PrivatBank, realizing that any nationalization of such big bank will create panic and nervousness in Ukraine and among Ukrainians. But there is always hope for the best. Ukrainians are tired of the collapse of banking system. It is time to start creating, not ruining.

Related: Samopomich party leader on Privatbank: the biggest budget robbery in millennium

Related: IMF considers PrivatBank nationalization an important step to ensure financial stability in Ukraine

Related: PrivatBank notes record number of cash withdrawals

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