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44 I Eastern Europe bne July 2019
The former governor of the National Bank of Ukraine Valaria Gontareva accuses the former owners of PrivatBank of large scale fraud.
VOX:
The nationalisation
of PrivatBank
now. At that time we were very worried about the nationalisation and so we pre- pared it step by step in cooperation with the Ministry of Finance and it was a very well organised and coordinated action. And it went smoothly.
bne: Do the courts even have the author- ity to undo a nationalisation? The central bank is the regulator. Its job is to judge
if banks are insolvent and it is obliged to close them down if they are to preserve the stability of the banking sector. Aren't these courts simply corrupt in that the decisions are being bought?
VG: Absolutely, no doubt [these courts are being bought]. Even I said bluntly unfortunately it is a corrupt court sys- tem and the general prosecutor's office is doing nothing to stop it.
bne: Kolomoisky is bribing courts which is illegal but the NBU has had to go back to the courts to appeal the decision. But the system is clearly being abused. Is there no short cut to the appeal process, which has to go through a corrupt court system?
VG: I’m a former central banker and not the general prosecutor. While I was gov- ernor for three years there were three general prosecutors. What can I tell you? They didn't do any reforms and all this system is corrupt but the central bank has no authority over this.
All the international community support the central bank and independence of the central bank. They all support the decision to nationalise PrivatBank. And the international community will never tolerate [the return of PrivatBank to the former owners].
If the bank is returned it means the international community will stop work- ing with Ukraine. What does it mean for investors? It means financial stability will be under threat. It is an existential threat for Ukraine. Not just the IMF,
but also the European Union and all Ukraine’s other partners too will stop working with Ukraine.
Then Ukraine won’t be able to meet its debt obligations. Over the next five years the budget expenditure for debt repay-
Ben Aris in London
The independence of the Nation-
al Bank of Ukraine (NBU) is under attack, says its former governor Valaria Gontareva, who was responsible for carrying out a sweeping reform of the country’s financial system. But Ukraine is facing an existential crisis as the former owners of the biggest bank in the country, PrivatBank, are abusing the corrupt court system to try and get their bank back after Gontareva nationalised it in 2016. If they are successful then the country faces a new economic crisis and possibly a meltdown of the financial sector.
bne IntelliNews editor-in-chief Ben Aris talked to Gontareva about the details
of the nationalisation of PrivatBank on the sidelines of Ukraine’s second annual banking summit in London where she now lives and works as a member of a London School of Economics think tank.
bne IntelliNews: Kyiv courts ruled that the nationalisation of PrivatBank was ille- gal, which opens the way for the bank to be returned to its former owner, oligarch Ihor Kolomoisky. What will happen if the bank is returned?
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Valaria Gontareva: The National Bank is obliged to follow the rules. If there is a court decision to undo the nationali- sation of a bank what can the National Bank of Ukraine do?
PrivatBank is a state-owned bank and if the courts ruled that the nationalisation was null and void what does it mean? It means that the Ministry of Finance will not be the owner any more and this bank will be transferred back to the former owners.
But what does that mean for finan-
cial stability? It means an absolutely total disaster. The central bank will be immediately obliged to call this bank insolvent. The central bank has only two choices: to either liquidate the bank or again ask the Ministry of Finance to nationalise the bank for a second time.
Why did we avoid the liquidation of
the bank in 2016? Because for financial stability we had no doubt that we could not allow the bank to be liquidated. It has 22mn customers and it is the biggest systemic bank in the country – then and