Ukraine president pledges not to return nationalised PrivatBank to former owners

Ukraine president pledges not to return nationalised PrivatBank to former owners
Ukrainian President Volodymyr Zelenskiy repeated promises not to return Pirvatbank to oligarch Ihor Kolomoisky at the Mariupol investment forum
By bne IntelliNews October 30, 2019

The team of Ukrainian President Volodymyr Zelenskiy and the new nation's government are not going to return the nation's banks that were nationalised or went bankrupt to the former owners, Zelenskiy said during a speech at the RE: THINK. Invest in Ukraine Forum in Mariupol on October 29.

Zelenskiy reminded that during the 2014-2016 financial crisis, taxpayer losses in the financial sector reached $15bn. About 100 banks were closed during the bank sector clean up under former NBU governor Valeriya Gontareva , including Delta Bank, Nadra Bank, Finance and Credit Bank, while the nation's largest lender PrivatBank was nationalised in December 2016 after bne IntelliNews published “Privat investigations” an investigation into its dodgy loan book as a cover story in November that year.

"In each of these cases, I say again, I will only protect the interests of the state of Ukraine. The interests of every Ukrainian. All these problems should not be solved at the expense of taxpayers," Zelenskiy said. "This is a very important message, and I want to reach out to anyone who spreads rumours that someone from the President's team or the new government is going to return the banks to the former owners - no, that's not true."

The leadership of the office of Ukraine's president believe that “regardless of the decisions of the courts,” there is no reason to return the state-owned PrivatBank to its former shareholders, the office's media service said in a statement on October 22.

According to the statement, ”pursuant to the instructions of the nation's President Volodymyr Zelenskiy,” head of the office Andriy Bohdan and his deputies Andriy Smirnov and Yulia Kovaliv attempted to reassure Ukraine’s donors during a meeting with ambassadors of the G7 countries. Ukraine’s most important donor, the International Monetary Fund (IMF), froze negotiations with Ukraine on a new Extended Fund Facility (EFF) in September specifically citing uncertainty over the fate of Privatbank as one of the main reasons.

"Particular attention was paid to the negotiation process with the IMF, the reform of the banking sector and the repayment of funds of bankrupt banks. Having made a decision on nationalisation, the state invested UAH155.3bn in PrivatBank, which allowed to save the funds of Ukrainians," the statement reads. "We believe that regardless of the decisions of the courts, there is no reason to return the state-owned PrivatBank to its former shareholders."

The meeting happened against a background of a snowballing legal crisis over the PrivatBank between the National Bank of Ukraine (NBU), the Ukrainian government and ex-owner oligarch Ihor Kolomoisky. The businessman returned to Ukraine on May 16 from Israel, ending a self-imposed exile that began in June 2017. On May 12, the other former co-owner of PrivatBank, Hennadiy Bogolyubov, also returned to Ukraine from Israel.

Earlier this year, Ukraine’s Supreme Court overturned the ruling by lower courts to de-nationalise the bank and return it to its former owners. The NBU has threatened to immediately renationalise Privatbank should it be returned to its former owners, as it would remove the capital it injected into the bank to rescue it, thus causing its immediate collapse if it were de-nationalised.

On April 8, Kolomoisky said that he is going to seek $2bn of compensation from the nation's government. "I don't need [to get back] PrivatBank. But there was $2bn in capital there. Let them [the Ukrainian government] return it to me and there will be no problems," Kolomoisky said in an interview with the Ekonomichna Pravda online outlet.

On October 15, the Court of Appeal of England and Wales, granted the appeal of PrivatBank against December's ruling of the court of first instance on the discrepancy between the jurisdiction of the financial institution's claim against the ex-owners.

"The court has given judgment confirming that the English court has jurisdiction to hear PrivatBank's fraud and conspiracy claims against its former shareholders, Kolomoisky Boholiubov. The worldwide freezing order, which has been in place since December 2017, will continue until judgment after trial.”