In response to accusations of its alleged involvement in schemes designed to siphon off funds through the correspondent accounts with small European banks, including Austrian banks, that provided special services to the customers from the CIS countries, including Ukraine, the National Bank of Ukraine provides the following information:
Correspondent accounts opened with the abovementioned banks were used for:
- an artificial expansion of Ukrainian banks’ capital. The scheme was used by banks to open correspondent accounts with such banks under the pretext of providing loans to their overseas customers, with these funds being transferred through a number of related companies and subsequently being included in the bank’s capital in the form subsequently debt
- moving funds abroad.
In mid-2014, the correspondent account balances of 17 Ukrainian banks with such transit banks amounted to approximately USD 2 billion.
The new management team of the NBU uncovered these schemes and committed domestically operated banks to suspend such correspondent accounts and transactions with those banks before 1 April 2016.
To prevent similar situations from happening again, the NBU developed a series of measures to tighten control over overseas transactions executed by banks. The NBU, inter alia, has:
- Streamlined internal regulations. In particular, the regulator obliged banks that held account balances at the non-investment grade banks subjected to to make 100 per cent provisioning, thus discouraging banks from moving funds abroad to lend to related parties; and
- Begun monitoring on a weekly basis correspondent account balances held by Ukrainian banks abroad.
In addition, the NBU closely cooperates with European central banks to improve information exchange on such transactions.
Back in September 2014, NBU Governor Ms Gontareva met the Governor of Austria’s central bank to tell him about the banks that were believed to be involved in such an activity.
As a result of these efforts:
- More than half of the amount held by Ukrainian banks in the correspondent accounts abroad was repaid in 2015
- Currently, none of the operating banks hold correspondent accounts with such transit banks.
- Out of 17 banks that used services provided by transit banks, 11 banks have been declared insolvent by the NBU. These included Finance and Credit Bank JSC, Delta Bank JSC, KYIVSKA RUS PJSC, BANK MIKHAYLIVSKIY PJSC, BANK NATIONAL CREDIT PJSC, Bank National Investments PJSC, ENERGOBANK PJSC, Ukrainian Professional Bank PJSC, CITY COMMERCE BANK PJSC, Integral-Bank PJSC and Expobank JSC. The Deposit Guarantee Fund, in close cooperation with law enforcement authorities, seeks to recover funds deposited by insolvent banks with foreign banks