Joint statement of the Ministry of Finance and the National Bank regarding the decision of the state to become the shareholder of the PJSC “Privatbank”
On December 18, 2016, the Cabinet of Ministers of Ukraine adopted a decision to take over the share capital of the PJSC “Privatbank”. According to this decision, 100% of the bank’s shares will belong to the Ukrainian state represented by the Ministry of Finance. This guarantees the customers of the PJSC “Privatbank” the safety of their savings, shall help avoid systemic risks for the banking system of the country and warrant the financial stability in Ukraine.
This decision makes it possible to protect more than 20 million citizens of Ukraine keeping their money at this bank and using its services. First of all, it is about 3.2 million pensioners and 1.6 million of other socially vulnerable citizens. All of them will have unrestricted access to their accounts.
The bank is now operating as usual and meeting all due obligations towards its customers and partners.
The Ukrainian state was forced to take over responsibility for the further operation of the Privatbank and its customers, in order to prevent the aggravation of its problems which, unfortunately, have been accruing for years and have intensified recently. The main cause of these difficulties is the unbalanced credit policy which incurred capital losses for the bank.
For more than two years, the National Bank has been negotiating with the bank’s shareholders to elaborate and implement a capitalization plan. However, the implementation of the plan is still pending. According to the findings of the National Bank of Ukraine, the Privatbank currently needs 148 billion hryvnas to restore its capital.
Being aware of all problems challenging the PJSC “Privatbank” and taking into account its importance as a system-building bank for the well-being of the financial sector and the entire economy of Ukraine, the National Bank could not postpone its intervention any longer and acknowledged the Privatbank as insolvent. Following this, the National Bank approached the Government of Ukraine with the proposal to transfer this bank with a critical importance for the whole banking sector of the country to the state property.
Also, the shareholders of the Privatbank sent a request to the Cabinet of Ministers of Ukraine asking the Ukrainian state to take over the share capital of the bank. In this request, the shareholders obliged themselves to restructure loans granted by the bank to legal entities in line with the National Bank requirements till July 1, 2017.
The transfer of the PJSC “Privatbank” into the state property will be carried out according to art. 41.1 of the Law of Ukraine “On the Warrant System for the Savings of Private Persons”.
“Compliance with the legislation, regulations and capitalization plans is crucial for the sustainable development of the bank and the financial stability of the country. The shareholders of the Privatbank failed to implement the capitalization program, which is why the National Bank of Ukraine, taking into account the importance of the bank for the entire financial sector, initiated the state participation in the bank’s capital”, Head of the National Bank of Ukraine Valeriya Gontareva said.
“Taking into account the systemic importance of this largest bank in Ukraine, it was decided to transfer it into the state property. This shall help us save its customers’ money and the financial system of the country. The Government is providing funds to stabilize the bank – the necessary allocations have been duly made for this in the state budget. The state budget itself will not be out of balance after this operation, the budget figures will remain in line with the agreements made under the IMF program”, Minister of Finance Oleksandr Danyliuk said.
International financial organizations and the financial market have been duly informed on all developments related to the Privatbank.
The situation is now under control, since the PJSC “Privatbank” is already managed by the state. It is operating as usual. The previous bank management has agreed to support the implementation of the anti-crisis program.
The transfer of the Privatbank into the state property will be carried under a special procedure as per art. 41.1 of the Law of Ukraine “On the Warrant System for the Savings of Private Persons”.
According to this procedure, the management board and the supervisory board of the Privatbank will be changed. There will be no other changes in the bank operation. All bank offices and all employees will continue to work.