Ukraine leader urges calm after big bank nationalised
AFP
AFP, KIEV: Ukrainian President Petro Poroshenko urged people not to panic Monday after his government nationalised the countrys largest private bank to try and avoid a rapid financial meltdown.
The former Soviet republics cabinet on Sunday took over PrivatBanka lender that held one-third of Ukrainians savings and had branches in the Baltic states.
The bank was owned by Poroshenkos political foe Igor Kolomoyskiy.
The billionaire was reportedly heavily burdened by debt because of dubious loans the lender made to his cronies.
Kievs decision falls in
line with the International Monetary Funds demand for Ukraine to clean up and stabilise its murky financial sector and seek sustainable growth.
The IMF welcomed the governments action.
But the nationalisation has created public unease about peoples holdings and whether the country might enter another economic crisis similar to when Russia annexed Ukraines Crimea peninsula in March 2014.
A subsequent 31-month war with pro-Russia insurgents in the separatist east claimed nearly 10,000 lives and seen the economy shrink by about 17 percent in 2014-15. Inflation soared to just under 50 percent last year.
Poroshenko, a pro-Western leader, said in a statement that the situation was under his full control.
I appeal to you, dear PrivatBank clientskeep calm, he said.
The new (state) administration is already taking over the levers of powerright now, this very hour and minute.
IMF heaps praise
Ukraines central bank had wanted Kolomoyskiy to refinance his bank with billions of dollars if he wanted to remain its owner.
There were fears that PrivatBanks fall could have ignited a wider crisis in the financial system akin to the turbulence in the United States in 2008.
But the tycoon never came up with the money and Kievs patience snapped on Sunday.
Finance Minister Oleksandr Danyluk said the governments decision will help preserve the savings of nearly 20 million PrivatBank clients.
All of our international
partners support this move, including the International Monetary Fund (IMF), the European Bank for Reconstruction and Develop-ment, as well as the government of the United States, the finance minister said.
IMF chief Christine Lagarde hailed the Ukrainian governments actions as an important step in their efforts to safeguard financial stability.
This decision was taken to ensure the smooth operations of the bank given its systemic role in Ukraines financial system, Lagarde said in a
statement.
Ukrainian Central Bank chief Valeria Gontareva told reporters that PrivatBank had miserably failed a series of stress tests and was in a $4.2-billion (4.0-billion-euro) hole in April 2015.
She said 97 percent of the banks loans at the time had been issued by Kolomoyskiy to his business partners who might either have not paid them back or had done so on preferential conditions.
Gontareva said the banks debts grew to $5.6 billion by December 1.
Kolomoyskiy himself has yet to comment.
But one PrivatBank manager on Sunday called the governments decision a consequence of media attacks led bypolitical powerbrokers who opposed Kolomoyskiy.
The decision to voluntarily and peacefully hand over the bank to the government was taken at the very moment that we understood that these media attackswhich we could survivecould endanger our clients, its IT director wrote on Facebook.
But some political analysts hailed the governments step as an overdue show of power over tycoons who have wielded outsized influence in corruption-riddled Ukraine for decades.
This may have been the very first time that the Ukrainian government took an actual hard decision, Dragon Capital investment banks economist Sergiy Fursa wrote on Facebook.
Nationalisation is a bad decision, he said. But it is better than all the otheralternatives.
