In response to information circulated by some media outlets regarding refinancing provided to banks and the use of loans disbursed to Ukraine by the International Monetary Fund, the National Bank considers it necessary to provide the following information:
With regard to ongoing cooperation with the IMF
On 3 April 2017, the IMF approved the disbursement of the next tranche of financial assistance to Ukraine to the value of USD 1 billion. As a routine arrangement, these funds will be disbursed to Ukraine within several days and will be used to replenish Ukraine’s international reserves.
A total of USD 7.5 billion was disbursed to Ukraine in three tranches under the EFF arrangement, of which USD 4.9 billion was credited to the NBU’s account and used to replenish international reserves and USD 2.6 billion was credited to the account of the Cabinet of Ministers of Ukraine. All the next tranches will be credited to the NBU’s account and used to replenish Ukraine’s international reserves.
The IMF monitors Ukraine’s international reserves on a daily basis and it is annually verified by the audit firm Deloitte. Therefore, any unauthorized use of international reserves is out of the question and all the insinuations in this regard are groundless.
Furthermore, the NBU’s net FX purchases have amounted to USD 3.1 billion over the past two years (excluding direct targeted interventions for Naftogas of Ukraine NJSC and NAEK ENERGOATOM conducted in 2015), which enabled the central bank to replenish international reserves.
The twofold increase in international reserves to USD 15.5 billion is the major achievement of cooperation between Ukraine and the IMF.
Cooperation with the IMF is critical for Ukraine in the upcoming years. In 2017-2019, Ukraine will face public debt service payments estimated at USD 12.8 billion (according to the revised data), including about USD 2.1 billion falling due in 2017, USD 4.2 billion falling due in 2018 and USD 6.5 billion falling due in 2019.
Given the need to make hefty public debt service payments, ongoing cooperation with the IMF is critical for ensuring Ukraine’s ability to meet its external debt obligations without triggering undue volatility in the FX market and jeopardizing the financial system stability as a whole.
With regard to refinancing provided to banks
When Ms Valeria Gontareva took office as the NBU Governor in June 2014, outstanding debts of the banks before the NBU under refinancing loans amounted to UAH 111.7 billion. As of the end of March 2017, outstanding debts of the solvent banks stood at UAH 17.8 billion, including UAH 15 billion owed by PrivatBank PJSC. The insolvent banks’ debts before the NBU currently amount to UAH 45.2 billion.
The largest debtors among the insolvent banks under refinancing loans include the following banks: Bank Nadra (outstanding debt amounting to UAH 9.8 billion, owner – Mr Dmytro Fitash), Bank Delta (UAH 8 billion, owner – Mr Mykola Lagun), Bank Financial Initiative (UAH 7.2 billion) and VAB Bank (UAH 3 billion, both banks are owned by Mr Oleh Bakhmatiuk), Bank Finance and Credit (UAH 6.3 billion, owner – Mr Kostiantyn Zhevago), Imex-bank (UAH 3.4 billion, owner – Mr leonid Klimov).
We would like to emphasize that under the leadership of Ms Gontareva, the NBU terminated the operation of the banks that were involved in illicit operations, including operations involving the siphoning off of funds received as refinancing loans out of Ukraine. Therefore, the NBU has repeatedly requested the law enforcement agencies to launch an investigation into offences committed by insolvent banks that have defaulted on their refinancing loan repayments. For instance, in 2015-2016, the NBU filed 12 claims with the law enforcement agencies reporting crimes committed by the banks’ shareholders and filed 44 lawsuits seeking to recover debts owed by these banks to the NBU from the financial surety providers.
Overall, in 2016-2017, the NBU enabled the National Anti-Corruption Bureau of Ukraine, the Prosecutor General’s Office of Ukraine, the National Police of Ukraine and the Fiscal Service of Ukraine access to information regarding offences committed in the banking sector on 183 occasions. The NBU stands ready to further cooperate with law enforcement agencies to bring to account these banks’ managers and owners.
We would like to draw your attention to the fact that loans that have not been repaid to the NBU were mainly granted to banks in 2008-2014. These loans were not backed by appropriate collateral, such as illiquid assets that were excessively overvalued. These banks have either been liquidated or are currently under liquidation. Therefore, starting from mid-2014, the NBU’s team increased the collateral appraisal requirements for collateral pledged against refinancing loans, required banks’ shareholders to provide personal guarantees and deployed international independent appraisers to perform collateral appraisal. The loans were granted to banks only to cover household deposit outflows up to the guaranteed amount of 200,000. The NBU overseer monitored these payments. Therefore, we can provide detailed reports on refinancing issued over this period. Any insinuations claiming that funds received as refinancing have been siphoned off abroad since our team took office were groundless.