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Delta Bank JSC declared insolvent

In compliance with the requirement of Article 76 of the Law of Ukraine On Banks and Banking, on March 2, 2015, the Board of the National Bank of Ukraine adopted Resolution No.150 declaring Public Joint-Stock Company Delta Bank  insolvent (hereinafter – Delta Bank JSC).

The National Bank of Ukraine emphasizes that that 94% of all the depositors of Delta Bank JSC hold deposits falling below the minimum guaranteed amount of UAH 200 thousand, which makes them eligible for remuneration by the Deposit Guarantee Fund (hereinafter – the Fund) in full. The number of eligible depositors is 554 thousand persons. Some customers with large deposits (approximately 6% of all the depositors) will receive compensation up to the amount insured by the Fund.

The main rationale behind the decision to declare Delta Bank JSC insolvent is the bank owner's failure to take timely, efficient and sufficient measures to restore the bank's financial health and viability and bring its operations in compliance with applicable Ukrainian laws. The principal shareholder and the management team of Delta Bank JSC have opted for a high-risk strategy of rapid growth through the acquisition of poor-quality assets. In addition, the aggressive development of corporate banking business of Delta Bank JSC, coupled with a lack of experience in the selected segment, has led to a considerable deterioration in the quality of the bank's loan book and shrinkage in bank liquidity. In today's crisis realities, the bank's principal shareholders have failed to promptly inject additional funds into the bank to increase its capital to the required level and raise liquidity to ensure the bank's ability to meet its obligations to depositors.

It should be noted that in order to prevent the deterioration in the liquidity position of the bank and protect the interests of Delta Bank JSC's depositors, as far back as in early 2014 (pursuant to resolution No 91), the National Bank of Ukraine granted loans worth UAH 4,150 million  to Delta Bank JSC to maintain its liquidity.  

Following the approval of the bank's capitalization program in September 2014, Delta Bank JSC received an emergency loan worth UAH 960 million (pursuant to resolution No 327) backed by securities guaranteed by the state. The aforementioned measures proved to be stop-gap measures that provided a temporary solution to the problems faced by the bank and fell short of producing visible results in restoring the financial health and viability of the bank. The contingency measures undertaken by the bank's shareholders and the management proved insufficient to put the bank back on track and the recapitalization plan presented by Delta Bank JSC never materialized. Furthermore, the bank lacked high-quality collateral needed to obtain an additional refinancing loan from the National Bank of Ukraine. Given the fact that Delta Bank JSC is a systemically important bank, the Ministry of Finance of Ukraine and the National Bank of Ukraine discussed the bank's resolution plans in detail and explored the possibility of potential state participation in the bank recapitalization process. However, given the poor quality of the bank's assets, the regulator was compelled to approve the decision to declare the bank insolvent.

 "The process of purging the banking system aiming to wind up insolvent banks and address the problems that have piled up in the banking industry over the years is still under way. This, coupled with the adoption by the the Verkhovna Rada of Ukraine on March 2, 2015, of the relevant law imposing greater responsibility upon bank owners and management for financial institutions' performance indicators, will enhance the banking sector's resilience and help ensure the reliable protection of depositors' and creditors' rights," said Governor of the National Bank of Ukraine, commenting on the decision to declare the bank insolvent.

Speaking about the state of the Ukrainian banking sector, Valeriia Gontareva pointed out that despite a full-blown financial crisis in the country's history and hostilities in the east of Ukraine, the majority of banks demonstrate strong resilience and viability.

"There is a sufficient number of viable and functional banks that are capable of delivering reliable services to their clients even in difficult times," concluded the Governor of the National Bank of Ukraine.

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