On October 27, 2015, the Examination Board of the State Property Fund of Ukraine (hereinafter − the SPFU) decided to strip Mr. Dmytro Chyrva of the appraiser's certificate – Certificate No.95, reads the letter addressed to the National Bank by the SPFU.
This decision was taken in view of the fact that the value of the collateral pledged against the stabilization loan had been significantly overestimated at appraisal.
In November 2013, the National Bank issued a stabilization loan of UAH 800 million to Real Bank PJSC. A petroleum storage depot (236, Chaikovskogo Str., Kherson) along with an oil terminal and a facility under construction (6, Laboratorna Str., Kyiv), both owned by third parties, were the two objects that were used as collateral against the stabilization loan.
The aforementioned objects were appraised by Mr. Dmytro Chyrva, an independent appraiser, at UAH 1.145 billion and UAH 258 million respectively and were pledged as collateral against the stabilization loan.
“However, the value of the petroleum storage depot and the oil terminal was appraised using the income approach, which was based on the assumption that the petroleum storage depot was operating at a 100% capacity utilization rate, whereas the fees charged for the storage and transfer of petroleum products would remain at highest levels throughout the whole period. But this assumption is completely wrong. The capacity utilization rate of the petroleum storage depot never exceeded 50%,” underlined Director of the Risk Management Department of the National Bank Ihor Budnyk.
According to him, the asset under construction (Kyiv) is an incomplete construction project, with no utility lines being installed. At the same time, A-Grade office premises offers (UAH 22 thousand per square meter at the moment of appraisal) were accepted as an equivalent sale and rent option.
The National Bank submitted the respective appraisal reports to the Association of Bank Appraisers of Ukraine for review. This Association issued an expert opinion to this effect, which, inter alia, reads as follows: “The appraisal report fails to meet the requirements set forth in the regulations governing real estate appraisal practices and it is of poor quality and (or) unqualified and, therefore, cannot be relied on.” On July 5, 2015, the aforementioned expert opinion was submitted to the SPFU for consideration. On October 8, 2015, the Examination Board of the SPFU to strip the said appraiser of the appraiser's certificate.
“Earlier, the National Bank relied solely on the appraisal reports issued by independent appraisers when taking a decision whether or not to accept the object as collateral. The experience suggests that in most cases such appraisers proved to be either not very competent, or not very independent. It is the first time ever that an appraiser has been stripped of his certificate. The National Bank is set to take a tough line on such practices. So far, claims against several other appraisers have been filed to the Examination Board of the SPFU. Appraisers have to take a responsible attitude to their duties, as their errors can cost the state budget billions of hryvnias,” said Ihor Budnyk. In July 2015, the Collateral Assessment and Monitoring Division responsible for the verification of appraisal reports was established and became operational to tighten control over the quality of collateral appraisal.
Ihor Budnyk underlined that the National Bank intends to further enhance the transparency of its decisions to grant loans and accept collateral against these loans. Earlier, the National Bank of Ukraine started publishing information on loans provided to banks. The next step is to publish a list of collateral pledged by insolvent banks, which would make the disposition of collateral more transparent to the public.