Graham Stack in Kyiv -

Speculation is swirling about the financial health of Brokbiznesbank, Ukraine's 18th largest bank by assets, as lines of customers formed in front of its retail customer service department in Kyiv on February 11. This follows widespread reports the previous day about clients experiencing problems withdrawing money from ATM machines and a major client, Ukraine's largest construction company Kyivmiskbud, switching to a state-owned bank.

The speculation around the unfortunately named Brokbiznesbank comes against a background of an ongoing slide in the hryvnia currency, bank liquidity problems, sovereign downgrades by rating agencies and a further deterioration in the economy. A bank failure, warn analysts, could mark the start of a shift to a full-blown crisis in Ukraine - something that has been feared since the political crisis erupted at the end of November.

Brokbiznesbank denies any problems and had quick answers to questions: acknowledging hitches with its payment system, the bank declared in a statement that these had arisen because it was terminating its partnership with the Visa payment system and switching to using the MasterCard Worldwide payments system.

Furthermore, the CEO of Kyivmiskbud, Ivan Kushnir, told press that there was no connection between his construction company's decision to switch banks and any problems at Brokbiznesbank.

Indeed, it is not yet clear if, or how much of, the current speculation surrounding the bank in the media and clogging up social networks like Twitter is tied to an organised campaign to destabilise the lender, a Kyiv banking insider tells bne. But such a campaign may become a self-fulfilling prophecy - according to respected newspaper Zerkalo Nedeli, retail clients of Brokbiznesbank withdrew around $9m in deposits last week.

"In 2014 the trigger for a crisis could be Brokbiznesbank, the collapse of which could bring down the interbank market and the control of the National Bank [of Ukraine]. It is not just the queues today - they have not been making payments for a couple of weeks, there is a whole heap of problems," the banking insider claims. "[The NBU] will probably try and bail out the bank, but any bailout funds will just be converted into hard currency."

Problems at the top

Worries about the bank are being exacerbated by the non-transparent operations of its owner, the 28-year-old controversial fuel trader Serhiy Kurchenko and his structure VETEK, which with associates acquired 80% of the bank in July. Kurchenko materialised out of nowhere in late 2012, giving rise to speculation that he is fronting for government figures. He has denied the allegations.

Even at the time of the bank's acquisition by Kurchenko, local media were reporting about the bank's poor financial condition: it was largely cut off from interbank funding and required $200m-300m in recapitalisation due to bad loans disbursed to structures linked to the bank's previous owners.

Further indications since then that not all was well at the bank included frequent turnover of top management: Kurchenko put in an experienced and respected bank manager, Igor Frantsekevich, to turn things around. But Frantsekevich left the bank after only four months, to be replaced in December by a little-known figure previously connected to Kurchenko. The bank also announced a fourth-quarter loss of around $3m at the end of January.

Kurchenko acquired Brokbiznesbank as part of a spending spree in 2013 that also saw him acquire football club Metalist in Kharkiv, the Odesa oil refinery, one of the country's largest, and the major news outlet Ukraine Media Holding.

But Brokbiznesbank's apparent problems coincide with questions concerning the financial health of its owner's other projects: reports at the start of February claimed that construction work on a new basketball arena in Kharkiv being built by Kurchenko and funded by Brokbiznesbank had been put on hold, and workers sent home. Kharkiv Arena's deputy head, Fedor Strilitz, at the time attributed the cessation of work to the extreme cold at end of January. However webcams at the site show that work has not yet been resumed.