The National Bank of Ukraine has adopted a decision to declare Bank CONTRACT PJSC insolvent. On October 6, 2015, the Board of the National Bank of Ukraine issued Resolution No. 671 to this effect.
In September 2015, the National Bank of Ukraine received a number of complaints from legal entities about Bank CONTRACT PJSC’s failure to effect payment transactions, which led the regulator to appoint a curator to this bank to conduct an in-depth investigation of the situation on the ground.
The curator has revealed a substantial amount of non-executed payment transactions that were concealed in various balance sheet items. In addition, the investigation has revealed a cash shortage of more than UAH 12 million at the bank’s cashier’s office (UAH 5.1 million actually available at the cashier’s office versus UAH 17.1 million as stated in the financial statements submitted to the National Bank). The Bank's management team blamed the discrepancies on the erroneous financial statements .
In addition, with the aim of improving the financial result, the Bank used fictitious transactions in securities, which de facto is misreporting.
Since the appointment of the curator to the Bank, neither the management team nor the Bank’s owner has approached the National Bank to devise a financial recovery plan for Bank CONTRACT PJSC, notwithstanding that under such conditions the Bank was unable to operate without the financial support of its owner.
Instead, the process to dispose of the bank’s property to third parties was launched with no actual proceeds derived from the sale of the property –with delays in payments through the reselling of securities etc.
The shortage of liquid funds, the bank’s failure to effect its customers' payment transactions and systemic misreporting of financial statements have posed threats to the depositors and creditors of Bank CONTRACT PJSC.
The Bank has been declared insolvent pursuant to paragraph 3 of part 1 of Article 76 of the Law of Ukraine On Banks and Banking, in accordance with which the National Bank of Ukraine is obliged to take a decision to declare a bank insolvent in case of a bank's failure, for five working days running, to fulfill 2% or more of its liabilities before depositors and other creditors.