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NBU’s comment on appeal against decision to nationalize PrivatBank

18 April 2019

Press Release

 

The National Bank of Ukraine (NBU) does not agree with and is preparing to appeal the ruling of the Kyiv District Administrative Court that declares unlawful and overrules the decision to conduct the government-assisted removal of the insolvent CB PrivatBank PJSC from the market. 

 

More specifically, on 18 April 2019, upon hearing an appeal by PrivatBank’s former owner Ihor Kolomoiskyi, the Kyiv District Administrative Court ruled that the procedure whereby the state participates in resolving the insolvent CB PrivatBank PJSC was out of compliance with applicable laws.

 

“The court ruling has yet to come into effect and will be appealed by the NBU.  We will continue to prove to the court of appeal that the regulator’s decisions and actions were lawful. We have reiterated on multiple occasions that the legal uncertainty driven by court rulings undermines financial stability,” said Viktor Hryhorchuk, Head of Litigation at the NBU Legal Department.

 

NBU will propose to the Financial Stability Board to appeal to the National Security and Defense Council of Ukraine and the Cabinet of Ministers of Ukraine and bring to their attention that such lawsuits deal irreversible damage to Ukraine’s international image.

 

“Ukraine’s international partners have on more than one occasion emphasized that PrivatBank’s nationalization was an important step towards ensuring financial stability. The decision to implement the government-assisted resolution of the insolvent PrivatBank was made in accordance with applicable law and supported by the National Security and Defense Council of Ukraine and the government of Ukraine with the aim to deliver financial stability and to safeguard the funds of the public. The legality of this decision is obvious, and there are no legal or economic grounds to reverse it. After the insolvent bank was resolved in a government-assisted procedure, the bank migrated fully to a market-driven business model and is now Ukraine’s most profitable bank and a part of the stable and transparent banking system,” said NBU First Deputy Governor Kateryna Rozhkova.

 

Please be reminded that the decision in December 2016 to declare PrivatBank insolvent and remove it from the market in a government-assisted procedure was based on the fact that the bank’s regulatory capital had become negative.  PrivatBank’s shortage of capital was revealed during stress testing and confirmed by an inspection and an audit by a reputable international audit firm.

 

As the bank’s former shareholders failed to meet their commitments to conduct the bank’s financial rehabilitation – something they said in a written statement they would make sure to do – the NBU declared PrivatBank insolvent and appealed to the government with a proposal to acquire shares of the bank.

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Last modification   18.04.2019