Page 46 - BNE_magazine_07_2020

46 I Eastern Europe bne July 2020
running a case around the hundreds of regional courts until their opponent simply gets tired and gives up.
However, the new public-appointed management of PrivatBank finds itself in the same position as foreign investors and also has to stick to the rules, as it is the embodiment of banking reform and representative of the clean-up of the banking sector.
And PrivatBank has few strings to pull. While it has enjoyed the full backing of the NBU, Ukrainian President Volodymyr Zelenskiy’s relationship with Kolomoisky, who sponsored his presidential campaign last year, remains opaque. The NBU has branded attacks on its staff and former NBU governor Valeriya Gontareva that ordered the nationalisation of PrivatBank as a “terror” campaign and called Kolomoisky out by name as orchestrating the attacks. But Kolomoisky continues to operate with impunity.
However, PrivatBank’s persistence in sticking to the letter of the law is part
of the ongoing efforts to clean up the banking sector and fight corruption. It is forcing an accountability on the judicial system and its fight against Kolomoisky is in itself a fight against corruption. Moreover, despite the minefield
that is its Ukrainian legal battle, the bank is making steady progress in its international court cases.
“Despite all these problems over the last years, every major decision has gone
in our favour. We very often consider a postponement as a decision in our favour as no news is good news. The reality is: although we have these constant battles and constant attacks, we are holding our own. We are actually making progress,” said Easky.
IMF backing the bank
One of the bank’s biggest advantages in the fight with Kolomoisky is that it has enjoyed the ardent support of the IMF, which linked its crucial new SBA deal to protecting PrivatBank from attack. If the courts eventually rule the bank must be returned to Kolomoisky then it is clear that would spell the end of the IMF’s assistance to the country.
www.bne.eu
Easky said that the existing laws on bank nationalisation were already enough to prevent a de-nationalisation of PrivatBank but she added that the “existing law was not strong enough
“The transactions are fundamentally considered to be fraudulent. The recovery will come from those locations, as that is where the transactions occurred,” said Easky.
“Despite all these problems over the last years, every major decision has gone
in our favour”
or specific enough [for] the NBU to enforce it effectively.”
The new IMF-sponsored law has been dubbed the anti-Kolomoisky banking law, but both the old and new laws address a more general problem of shareholders raiding their own banks and stealing their own deposits for personal gain.
“The [passage of the new banking] is a great victory for banking reform in general,” said Easky.
The NBU has come out of the whole PrivatBank story looking professional and responsible – very different to the rest of the government.
“The NBU is the shining star of Ukraine’s reforms. It was the right people coming together at the right time. It was a
small coalition at first, but a coalition of reformers and people that really want what is good for the future of Ukraine who became galvanised in that space,” said Easky.
Offshore legal battles
PrivatBank is under attack from Kolomoisky's legal onslaught, but PrivatBank is fighting back with its own sets of lawsuits. The two most important are taking place in London and Cyprus, mainly because money exiting PrivatBank travelled through those two jurisdictions.
The NBU has done its own internal investigation to track down where the money went. And the NBU also hired corporate investigators Kroll to carry out a forensic audit to find the missing money.
Recovering the money will be difficult and time consuming, as everyone that has commented on the loan schemes says the same thing: the transactions were very complicated and unravelling them will be very difficult.
But PrivatBank is making progress. Kolomoisky challenged the legitimacy
of the court in London to hear a case against him, but the court of appeal recently ruled that the case can be heard in London and that the case will move forward to trial and the schedule will
be set in June. Easky said it will probably be 12-18 months before it starts.
More recently, a new lawsuit was brought in Cyprus to chase down the fraudulent loans that passed through that jurisdiction. In both the London and Cypriot cases PrivatBank is trying to recover about $1.9bn plus interest, which is being charged at Ukrainian rates: in London the bill is already
up to $3bn and it will be even more
by the time the case comes to trial.
If Kolomoisky loses he faces being bankrupted, although it will take years to conclude the legal cases and years more to recover the funds, if ever.
PrivatBank back in business
In the meantime, the new management have a large and successful bank to run. Kolomoisky had already built PrivatBank up into a market leader and would be
a wealthier man today had he simply concentrated on business.
The new management is building on the existing success. PrivatBank saw its profits jump by 2.5 times year on year to UAH32.6bn ($1.2bn) in 2019, which