In accordance with the Laws of Ukraine On the National Bank of Ukraine, On Banks and Banking, and On Households Deposit Guarantee System, the Board of the National Bank of Ukraine (hereinafter “the NBU”) has decided to resolve SENSE BANK JOINT STOCK COMPANY (hereinafter “SENSE BANK JSC” or “the Bank”), a systemically important bank, and made an offer to the Cabinet of Ministers of Ukraine regarding the state’s participation in this procedure.
According to SENSE BANK JSC, the owners of a direct qualifying holding in the Bank are ABH Ukraine Limited (Cyprus) and ABH Holdings S.A. (Luxembourg). The owners of an indirect qualifying holding are Mikhail Fridman, a citizen of russia and Israel, Petr Aven, a citizen of russia and Latvia, and Andrei Kosogov, a citizen of russia. Said individuals are the ultimate key participants in the ownership structure of SENSE BANK JSC.
The affiliation of indirect qualifying holders of SENSE BANK JSC Mikhail Fridman and Petr Aven with russia – an aggressor state that has been waging full-scale war on Ukraine since 24 February 2022 – and their support for actions and policies that threaten the territorial integrity, sovereignty, and independence of Ukraine are posing a significant reputational risk and having a substantial adverse impact on the Bank’s activities.
Specifically, a 2022 report by independent auditor RSM Ukraine LLC describes the negative impact of reputational risk on the activities of SENSE BANK JSC. The auditor’s report highlights the conclusions of the Bank’s management about the existence of significant uncertainty that casts considerable doubt on SENSE BANK JSC’s capability to be a going concern, i.e. to continue to operate indefinitely.
The dynamics of some of SENSE BANK JSC’s performance indicators is evidence of a significant adverse fallout from reputational risk. SENSE BANK JSC’s regulatory capital fell by 50% between 1 March 2022 and 1 July 2023, eroded by the deteriorated payment discipline of the Bank’s borrowers. By way of comparison, regulatory capital in other systemically important banks increased by 29% within the same period.
Because indirect qualifying holders of SENSE BANK JSC Mikhail Fridman and Petr Aven are affiliated with the aggressor state’s regime, these individuals have come under sanctions from the European Union, the United Kingdom, Canada, Switzerland, Australia, and New Zealand. The sanctions involve a freeze on assets.
The Ukrainian President’s Decrees No. 726/2022 and No. 727/2022, dated 19 October 2022, brought into effect a decision of the National Security and Defense Council of Ukraine (hereinafter “the NSDC”) that applied personal sanctions against Mikhail Fridman, Petr Aven, and Andrei Kosogov, indirect qualifying holders of SENSE BANK JSC, including by freezing their assets. ABH Ukraine Limited and ABH Holdings S.A. – direct qualifying holders (shareholders) of SENSE BANK JSC – are also under sanctions that include an asset freeze, as per Decree No. 371/2023, dated 5 July 2023, of the President of Ukraine.
On 14 March 2022, Andrei Kosogov became the owner of a 40.9614% indirect qualifying holding in SENSE BANK JSC after shares were transferred to him from German Khan and Alexey Kuzmichev. The acquisition of the qualifying holding in SENSE BANK JSC was carried out without the NBU’s consent and in violation of Ukrainian laws.
Furthermore, the NBU in 2023 received from ABH Holdings S.A. a notice of intention to transfer control over SENSE BANK JSC to Karswell Limited (Cyprus). Should it be allowed to go forward, such a deal will contradict the sanctions that the NSDC applied against Mikhail Fridman, Petr Aven, and Andrei Kosogov on 19 October 2022 and against ABH Holdings S.A. and ABH Ukraine Limited on 5 July 2023.
As per imposed sanctions, the direct and indirect qualifying holders of SENSE BANK JSC, which together hold 100% of the Bank’s capital, are deprived of the right to dispose of or alienate their assets in any way, shape, or form. The recognition by the NBU of their business reputation as less than impeccable and the ban on the use of their voting rights in proportion to their stakes in the Bank are consequences of their own actions or failure to act.
SENSE BANK JSC was designated systemically important by NBU Board Decision No. 95-D dated 8 March 2023. The Bank was also categorized, by NBU Order No. 377-NO dated 17 April 2023, as critical to the functioning of the economy and to the livelihood of the people during the special period. According to data from Deposit Guarantee Fund (hereinafter “the DGF”) available on 1 July 2023, the amount of a potential reimbursement of retail deposits (including those of sole proprietors) stands at UAH 44,323 million.
The qualifying holders of SENSE BANK JSC are unable to meet their commitments, as defined by the Law of Ukraine On Banks and Banking, specifically to maintain, on a permanent basis, a level of capital sufficient to comply with the regulatory ratios established by the NBU, and to take timely measures to prevent the Bank’s insolvency.
Taking into account martial law, which was imposed in Ukraine due to russia’s full-scale military aggression against Ukraine, and the current financial standing of SENSE BANK JSC, all of the above poses a threat to the interests of depositors and other creditors of the Bank.
Under such conditions, in accordance with the Law of Ukraine On Banks and Banking, the NBU must make a decision to resolve SENSE BANK JSC, a systemically important bank.
Pursuant to the NBU Board’s decision, the DGF’s Executive Board decided to introduce in SENSE BANK JSC a provisional administration and to give it the necessary powers. In line with the decision noted above, the provisional administration is effective from Friday, 21 July 2023.
While under the provisional administration, services will be provided to individuals as usual, without additional restrictions being imposed by the DGF. Payments from legal entities will also be accepted without limitations.
After the Cabinet of Ministers of Ukraine makes a decision regarding the state’s participation in resolving the Bank, the provisional administration will cease within two days from the day following the day that the DGF receives the aforesaid decision.