On September 17, 2015, pursuant to Article 76 of the Law of Ukraine On Banks and Banking, the Board of the National Bank of Ukraine issued Resolution No. 612 on declaring Finance and Credit PJSC insolvent.
The National Bank of Ukraine emphasizes that 93.2% (234 thousand individuals) of all the depositors of Finance and Credit PJSC will be paid out in full, as amounts held in their deposit accounts fall within the insured deposit amount of UAH 200 thousand, which is covered by the Deposit Guarantee Fund (hereinafter – the Fund). Customers with larger deposits (above the insured deposit amount) will be reimbursed up to the compensation limit guaranteed by the Fund.
“We have long been working on the bank's recovery plan with both the bank’s managers and the majority shareholder – Kostiantyn Zhevago. The bank has been in trouble for seven months, after being declared a problem bank. Throughout this period, the shareholder followed all the recommendations provided by the National Bank as to how to recover the bank. After this, Finance and Credit PJSC assumed an obligation to use the proceeds derived from the sale of non-core assets held by the shareholder to support the bank’s liquidity and comply with the provisioning requirements and prudential ratios. Starting from August 17, the aforementioned bank has returned to normal operation, – said Governor of the National Bank of Ukraine Valeria Gontareva, – the National Bank continued to monitor the situation in the bank on a daily basis. When the shareholder failed to meet its obligation – we responded promptly. Today, the bank has been declared insolvent and placed under jurisdiction of the Fund”.
According to the Governor of the National Bank, the lion's share of the bank assets was linked to lending to business entities owned by the shareholder. “When the time came for the shareholder to settle its debts and dispose of its assets – he failed to do it in due time. I would like to reassure you that this bank is not a systemically important bank, and the decision to declare it insolvent does not pose a risk to the stability of Ukraine’s banking sector,” stressed Valeria Gontareva.
We would like to point out that in May Finance and Credit PJSC approved the financial recovery program, under which it increased the authorized capital by UAH 2.6 billion. In addition, additional issuance of capital stock was announced through the contributions made by the majority stakeholder and the bank’s depositors. The National Bank also joined the efforts to rescue FINANCE AND CREDIT JSC. In 2015, two stabilization loans worth UAH 700 million and UAH 750 million were disbursed to the bank in February and June respectively. It should be noted that these loans were solely used to pay out deposits of up to UAH 200 thousand.
However, these measures were insufficient, the shareholder failed to fulfil its written obligations to support liquidity and comply with the prudential ratios in agreed timeframe, including obligations to meet the prescribed provisioning requirements, regulatory capital adequacy and liquidity ratios.
As a side note, on March 2, 2015, Law of Ukraine No.218-VIII On Amendments to Certain Legislative Acts of Ukraine related to the liability of bank's related parties was passed, which strengthened the responsibility of the bank owners and managers for driving their financial institutions into insolvency Under this law, bank-related parties shall be financially liable for losses inflicted to the bank by their actions, and much higher fines shall be imposed on a bank’s CEO. In addition, the Criminal Code of Ukraine has been amended to include Article 218-1, under which driving a bank into insolvency (if it has inflicted heavy financial losses to the state or the creditor) is punishable by restraint of liberty for the period from one to five years, or imprisonment for the same period, and the imposition of a fine and a deprivation of a right to occupy certain positions or be engaged in certain activities for up to three years.