Lately, there have been more insinuations in the mass media regarding the role of brokers and my personal role in the purchase of domestic sovereign bonds (DSBs) for nonresident companies in the fall of 2013. To stop this wave of untrue information, I would like to dot the i's and cross the t's.
First, I’d like to say that the National Bank of Ukraine and I personally have stressed on numerous occasions that we fully support the law on special confiscation or any other lawful way of returning funds to the State Budget This stance of ours is open and publicly known, but nevertheless, certain politicians are trying to manipulate facts and accuse the NBU in dragging out this process. We at the NBU consider these assertions manipulative and groundless. It is obvious that it is MPs who have to failed to pass the law on special confiscation, which allows for funds to be returned to the budget. For its part, the NBU did everything possible to make sure that these funds were arrested back in June 2014. The banking regulator eagerly expects the MPs to pass this law to bring revenues to the state budget.
Now, let’s get to the accusations against me personally. For over eight years, ICU has been the leader on the DSB market in terms of brokerage services and trading in government securities. Its leading positions are corroborated by public ratings of securities trading and client asset management. Therefore, when investors or banks needed professional management of agreements on debt securities, they sought, in most cases, services from ICU.
The revised version of the Law of Ukraine On the Depositary System of Ukraine enacted in October 2013 has obliged market participants to make all domestic sovereign bond purchase-sale agreements via licensed brokers. This Law has also changed the rules for settlement of debt under operations with securities, requiring all debt settlement transactions to be done solely via Debt Settlement Center PJSC.
When the state-owned Savings Bank needed to engage a licensed broker to handle secondary market agreements between the bank and nonresidents, they went to ICU. Before the revised version of the aforementioned Law was enacted, Savings Bank had no need to engage a broker because it was a servicing bank, DSB custodian, and primary dealer for nonresidents. In 2012-2013, Savings Bank invested in domestic sovereign bonds from the Finance Ministry of Ukraine on orders from nonresident companies by itself.
Savings Bank has confirmed the receipt of funds and that nonresident companies were subjected to financial monitoring, and, therefore, ICU had no suspicions whatsoever with regard to these companies since all documents and account statements from the state bank were fully compliant with the requirements of Ukrainian law. All debt settlement transactions under operations with DSBs were handled by Savings Bank, and the latter acted as the seller of DSBs to nonresidents.
Information that these nonresident companies may be owned by the “criminal government” first appeared in mid-2014, and the NBU began actively helping to place their accounts under arrest. According to the rulings of the Pecherskyi District Court in Kyiv, accounts of these companies at Savings Bank were arrested in June 2014.
Presently, funds and securities in the accounts of the nonresident companies at Savings Bank remain under arrest and are waiting for a resolution of the Verkhovna Rada of Ukraine regarding special confiscation. As of the end of September 2016, the balance of the arrested accounts amounted to USD 645.4 million and UAH 1.8 million. The total nominal value of DSBs bought on behalf of this group of companies is USD 981 million.
Today, certain politicians are accusing me of facilitating the flow of funds out of country engineered by the “criminal government.” I consider these accusations nonsense because these funds were not transferred abroad; they were invested in domestic debt. It was a direct loan to the State Budget, which the State, if the law on special confiscation will be passed, won’t have to repay.
Taking this opportunity, I also would like to mention that my work at ICU mainly concerned asset management. I had nothing to do with the brokerage, which, by the way, is well known to all professional market participants.