Page 45 - BNE_magazine_bne_July2019_20190707

bne July 2019 Eastern Europe I 45
ment and financing the budget deficit is 8% of GDP a year – $11bn-$12bn a year – and our country has no ability to do that without the international community and international investors’ help.
Kolomoisky called for Ukraine to default on its IMF debt in the Financial Times interview. But nobody will allow him to get the bank back nor will they pay any compensation. For what? For stealing $5.5bn? Or more. Today the CEO of PrivatBank said he still owes the bank UAH200bn, which means $7.6bn, not $5.5bn, which we injected into the bank.
Privatbank has separated the non-per- forming loans (NPLs) into two classes: bad loans that are the result of the normal course of business and the “fraud loans” which were a result of the former owners' scams to withdraw money illegally.
bne: Is there any doubt that the money taken out of Privatbank was taken out illegally?
VG: How can there by any doubt? The bank was a pure pyramid scheme. It was a pure Ponzi scheme. The central bank is not Kroll. It is not a forensic auditor. The central bank identified all these gaps [in the balance sheet] and then hired Kroll to conduct an investigation. Then the lawers prepared their case.
It was 100% certain that the money was stolen. I left the central bank two years ago and initially during the nationali- sation I said together with the former finance minister Oleksandr Danylyuk that the hole in PrivatBank’s balance sheet was UAH146bn ($5.5bn).
After the nationalisation we had a post- audit of the bank that was carried out by EY. They said to us: “Central bank you were wrong. You need an additional UAH138bn ($5.2bn) of capital [to close the balance sheet gap.]”
The total of UAH155bn that was injected is less, but only because we did some bail-ins for depositors.
After two years not a single kopek has been repaid. The central bank has com- plied a list of related party transactions
and it was absolutely clear that all this money taken by the owners of this bank.
bne: Didn't you meet with the former shareholders and didn't they sign a letter guaranteeing they would repay much of the missing money?
VG: There was a letter where the owners promised to repay some of the money but they ignored it.
To go back and put this letter into context: at start of 2015 we started
a diagnostic of all banks – not just PrivatBank. All the banks were checked. The methodology that was used was the same for all Ukrainian banks. We looked at asset quality and stressed tested the bank. The criteria was developed by
the central bank together with the IMF.
The first results showed us that in 2015 there was a real gap in the capital of PrivatBank worth UAH113bn and in 2016 a recapitalisation plan was agreed with PrivatBank.
The plan was the same for all Ukraine’s banks. They were given four years and in the first year had to reach a capital adequacy ratio (CAR) of 0% by April 2016 before gradually building up their CAR to 10%, the mandatory minimum. PrivatBank’s shareholders committed together with the management to fulfil all these obligations.
At the same time they had to reduce the amount of related party lending and deleverage. Over five years they had to repay all these related party loans and eliminate all this lending.
PrivatBank was just a pyramid based on related party lending. But that was
not the biggest problem. We had this programme to eliminate related party lending, as it was not just a problem in one bank – it was the biggest systemic problem in the entire bank sector.
The owners agreed to the obligation and signed guarantee letters. Kolomoisky himself provided his personal guarantee to fulfil these obligations – not just
to pay off this UAH113bn for the recapitalisation.
In the first stage of the recapitalisation the owners were supposed to put UAH31bn of real assets on their balance sheet. The recapitalisation was one problem but the main problem was all this related party lending was never done properly, loans with real collateral and real cash f low. [The debtor companies] were just empty shells.
When we injected UAH115bn [into PrivatBank during the nationalisation] we injected real assets, because before it was just a list of empty fraudulent companies.
The first recapitalisation was supposed to be completed before April 1, 2015 but unfortunately because PrivatBank was not putting in good assets it was delayed to August. Finally under the pressure of the central bank they put in the UAH31bn.
But then the central bank decided to check the register five days later and
of all these assets, UAH5.5bn from the UAH31bn, had already been withdrawn. It means [the shareholder] didn't
even meet the first of their obligations to recapitalise the bank. It was
fraud again.
bne Podcasts
This article is based on
a bne IntelliNews podcast
LISTEN FULL INTERVIEW
SUBSCRIBE (FREE)
www.bne.eu