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NBU Declares BANK SICH JSC Insolvent

NBU Declares BANK SICH JSC Insolvent

The Board of the National Bank of Ukraine has declared BANK SICH JSC insolvent for failure to discharge its liabilities to the NBU within the period prescribed in the refinancing loan agreement due to the lack of funding.

BANK SICH JSC failed to pay interest on refinancing loans for July 2022 in violations of terms and conditions of the General Loan Agreement (hereinafter referred to as the “Agreement”) executed by and between BANK SICH JSC and the NBU. Despite available liquidity funds for paying interest on the refinancing loan, the supervisory board and the board of the Bank adopted the decision not to pay interest on 29 July 2022. Considering the default on refinancing loan interest under the Agreement, the NBU filed a claim to the financial institution on the early full repayment of debt on refinancing loans. On 4 August 2022, the supervisory board and the board of the Bank approved the decision on not meeting said claim due to insufficient funds.  Considering the above, on 5 August, the NBU was forced to meet its claims on the account of securities pledged as collateral. In line with Article 76 of the Law of Ukraine On Banks and Banking, failure to discharge liabilities to the creditor due to insufficient liquidity gives grounds to classify the bank insolvent.

Pursuant to Article 58 of the Law of Ukraine On Banks and Banking, qualifying shareholders in a bank shall be obliged to take timely measures to prevent the bank’s insolvency. However, qualifying holders of BANK SICH JSC failed to take any effective measures to improve its financial standing in order to perform its liabilities to the NBU within the timeframe set in the Agreement.

Furthermore, BANK SICH JSC exhibited inadequate corporate governance, ineffective business model, engaging in risky transactions, all of which is confirmed by loss-generating operation and negative trends in capital ratios.

Said financial institution accounts for 0.3% of solvent banks’ net assets as of 1 August 2022. Classifying BANK SICH JSC as insolvent will not influence the stability of the Ukrainian banking sector, which remains resilient and solvent.

After the Law of Ukraine No. 2180-IX On Amendments to Certain Laws of Ukraine Concerning Ensuring the Stability of the Households Deposit Guarantee System dated 1 April 2022 comes into force, the DGF will reimburse to each BANK SICH JSC depositor the amount of their deposit, including interest accrued as of the end of the day before the date of the resolution procedure, unless otherwise provided for by Article 26 part four of the Law of Ukraine On Households Deposit Guarantee System. The total possible amount of guaranteed payments to depositors as of 1 July 2022 is UAH 1,229.7 million.

BANK SICH JSC was declared insolvent by NBU Board decision No. 405 dated 9 August 2022.

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