Page 26 - bne_Magazine_June_2017

26 I Special report bne June 2017
A client leaves PrivatBank in Kyiv (AP Photo/Efrem Lukasky)
EBRD offers to help reduce state dominance of Ukraine banking sector
Sergei Kuznetsov in Kyiv
The nationalisation of Ukraine’s biggest lender PrivatBank in December has dramatically changed the landscape of the coun- try’s banking sector. After the takeover, state-owned banks control around 52% of the country's market, compared with around 26% in early 2015.
The latest developments have resulted in extra hurdles on the government's path towards a planned reduction of the state’s share in the banking sector. This mid-term strategy is supposed
to be carried out through reforms
and sales of state-run banks, and should provide an opportunity to strengthen competition on the market and
reduce corruption.
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International financial institutions, such as the EBRD, are offering to help with this process, given the likely shortfall in potential foreign investor interest in the near future.
"The state cannot be an efficient owner. That is why the EBRD, other interna- tional institutions and the Ukrainian government will work together to reduce the state's share in the banking sector," Anton Usov, the EBRD’s spokesman in Kyiv, tells bne IntelliNews.
The International Monetary Fund (IMF) said in its report published on April
4 that Ukraine intends to accelerate
the reform of state banks, introduce new corporate governance and risk
management standards, and develop an efficient business model.
In February 2016, the Ukrainian authori- ties published an IMF-compliant five- year roadmap for reforming state-run banks. According to the document, two state-owned lenders that were consid- ered as core – Oschadbank and Ukrex- imbank – could sell up to 20% of shares to a qualified investor or international financial institution via a transparent tender by mid-2018.
To implement this goal, the supervisory boards of the two banks need to select a priority method for selling their shares and coordinate it with the finance ministry in 2018, based on the financial results of the banks during 2017. The final decision on the sale of shares must be made by the Ukrainian government no later than the first quarter of 2018.
According to the roadmap, Oschadbank could specifically target credit risk
and currency risk entailing products
for retail and small- and medium-sized businesses (especially projects in the agricultural sector and in the area of energy efficiency), as well as large businesses (energy, agricultural sector and infrastructure), which "will enable a managed transition to diversification".
Key client segments formulated for Ukreximbank include export-oriented enterprises, enterprises that implement import-related projects, and Ukrainian companies that fulfil contracts abroad.
However, due to the recent hike of the state's share in the banking sector, Kyiv is forced to amend the roadmap. On April 19, the Ukrainian government approved
a tender to select an internationally recog- nised consulting company as an advisor to draw up the adjustments to the document.
According to the latest memorandum on economic and financial policies between Ukraine and the IMF, Kyiv should prepare amendments to the roadmap in light of the nationalisation of PrivatBank, to be approved by the Ukrainian cabinet this spring.
"By end-June 2017, the finance ministry