KYIV – The European Union has praised Ukraine’s leadership for its decision to nationalize the country’s biggest bank, calling it a “bold and courageous” move and a key component of broader reforms that the West is pressing Kyiv to carry out.
EU foreign-policy chief Federica Mogherini spoke on December 19, a day after President Petro Poroshenko’s Cabinet said it would nationalize PrivatBank in an effort to avoid a financial collapse in the former Soviet republic.
“Let me use this occasion to commend… the prime minister’s, the president’s, the government’s efforts in these hours to restore confidence in the financial sector as we have seen through a bold and courageous decision to nationalize Privatbank,” Ms. Mogherini said at a December 19 meeting of the EU-Ukraine Council in Brussels.
“This step should help ensure that all banks in Ukraine are held to the same prudential regulatory standards, making the banking sector stronger and more resilient,” she said. “It is also a vital component of larger reform efforts that the European Union together with the international partners supports strongly.”
Ukraine’s Cabinet of Minister said in a statement late on December 18 that the government had decided to take 100 percent control of PrivatBank, founded by a billionaire former governor, Ihor Kolomoyskiy.
The move follows months of rumors that the bank was troubled by bad debt.
The statement by the Cabinet said the takeover would rescue both PrivatBank and Ukraine’s “entire banking system.”
On December 19, President Poroshenko said that, in the past few hours, “the National Security and Defense Council, the National Bank, the Cabinet and the Finance Ministry have adopted all [necessary] legal and formal decisions in order to transfer PrivatBank under the full state ownership.”
“The situation is under control,” National Bank of Ukraine chief Valeriya Hontareva said at a news conferemce with Mr. Poroshenko. She said the central bank would take steps to “ensure uninterrupted services” to PrivatBank depositors, and added: “We do not expect a sizeable outflow of deposits from PrivatBank, and we do not envisage it [will] make a substantial impact on the currency market or the level of inflation.”
The government said the transaction was agreed upon with Mr. Kolomoyskiy and PrivatBank’s other main owner, Hennadiy Boholyubov, who control assets in a broad range of sectors, including media, oil, and chemicals.
But Mr. Kolomoyskiy took to Facebook to lash out at the government following the statement. “This is not a nationalization. It’s a classic illegal takeover,” he wrote.
He added that clients should not panic, and that “everything would be fine” with their money. “Only the shareholders have suffered. And the investment climate in the country. Which, by the way, doesn’t exist anymore,” Mr. Kolomoyskiy wrote, promising that there would be more details later on December 19.
Mr. Kolomoyskiy, one of Ukraine’s richest men, served briefly as head of Dnipropetrovsk Oblast and was credited with preventing the spread of separatist sentiment in the region following Russia’s 2014 annexation of Ukraine’s Crimea territory and backing of armed separatists in the east of the country.
But President Poroshenko dismissed him in 2015, accusing him of setting up a private militia and trying to take over a state-affiliated oil company.
The region Mr. Kolomoyskiy governed, which is now called Dnipro Oblast, borders the Donetsk Oblast – one of two regions held in part by Russia-backed separatists whose conflict with Kyiv’s forces has killed more than 9,750 people since April 2014 and continues despite a European-brokered agreement to end the fighting and resolve the conflict.
The move to nationalize PrivatBank was praised also by the International Monetary Fund (IMF), which has loaned Ukraine billions to help prop up its battered economy. IMF chief Christine Lagarde called it “a major step forward in the authorities’ efforts to rehabilitate the banking system and safeguard financial stability.”
“The IMF will continue to support Ukraine in its efforts to maintain macroeconomic stability and advance reforms to achieve strong and sustainable economic growth,” she said in a statement.
With reporting by AFP, the Financial Times, and the Kyiv Post.
Copyright 2016, RFE/RL Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave. NW, Washington DC 20036; www.rferl.org (see http://www.rferl.org/a/ukraine-nationalizes-privat-bank/28183273.html).