PrivatBank ex-chairman says bank’s nationalisation wasn’t justified

From The Financial Times:

In his first foreign media interview since he was removed as PrivatBank chairman in Sunday’s state takeover, Olexandr Dubilet told the FT that the Ukrainian government’s move to nationalise the country’s biggest lender this week was unfounded, and there was no $5.5bn hole in its accounts.

Mr Dubilet said that Ukraine’s central bank had used flawed methodology that fell short of international standards to assess the lender’s collateral and risk.

He claimed there was an alleged hole only because the National Bank of Ukraine refused to recognise many large assets, such as commercial property, as collateral.

Mr Dubilet also accused the NBU of exaggerating the bank’s related-party lending – which the regulator put at 97 per cent of its commercial loan book – by classifying many individuals or entities that had no connection to the lender as related parties.

“We are categorically not in agreement with the national bank’s assessment of risks and collateral,” Mr Dubilet said. “They were not using international standards. According to an audit by an independent auditor which was conducted last year, we had UAH150bn hryvnia ($5.7bn) as collateral, but the NBU didn’t recognise this amount as collateral.”

International financial institutions, rating agencies and many analysts have welcomed the Ukrainian authorities’ move as a long-overdue culmination of efforts to clean up the country’s banking sector. The IMF is understood to have made tackling balance-sheet issues at PrivatBank a condition of releasing the next tranche of a $17.5bn bailout programme.

Christine Lagarde, the IMF managing director, said the nationalisation was an “important step in [Ukrainian authorities’] efforts to safeguard financial stability”.

But the bank’s former management and its main shareholder, billionaire oligarch Igor Kolomoisky, on Friday launched a public relations offensive to insist nationalisation should not have been necessary.

Mr Kolomoisky said he agreed to the state takeover only to safeguard the bank after customers started withdrawing deposits following what PrivatBank has called “information attacks”. He hinted the central bank was behind these attacks.

“As a result of the latest wave of customer panic provoked, first of all, by the NBU’s actions, we were forced to turn to the Cabinet of Ministers with a proposal to hand over PrivatBank to the state,” the tycoon said in a statement.

Mr Dubilet also said the bank’s nationalisation was the result of “information attacks, and the fact that deposits and other funds were flowing out of accounts”.

Despite widespread international approval of the Ukrainian authorities’ move, claims by ex-management and shareholders may be seized on by holders of $595m of PrivatBank Eurobonds.

Bondholders have signalled they may take legal action after a “bail-in” that saw their bonds wiped out and converted into shares in the lender.