Connect with us

Banking

Ukraine government takes over Largest Bank in surprising move

Published

on

In a bid to rescue the nation’s largest bank, the Ukrainian government has bought all the shares of the bankrupt PrivatBank. The Cabinet of Ministers of Ukraine agreed on the 18th of December to take over the bank after it was declared insolvent by the National Bank of Ukraine. The government will contribute towards the recapitalisation of the bank, while also nominating former finance minister Oleksandr Shlapak, as the new President of the bank. The Ministry of Finance and the National Bank of Ukraine said in a joint statement “This move will ensure the security of funds and savings deposits placed with this bank, help avert systemic risks to the banking system, and will pave the way for preserving financial stability in the country.”

With over 20 million customers, PrivatBank is not only responsible for the accounts of nearly half of the country’s population, but also of 3.2 million pensioners. The government confirmed that the money in the accounts won’t be affected, and consumers will have continued access. “They all will have unrestricted access to their accounts”, the statement added. As the country struggles with an economic recession, continued internal conflict and political imbalances in the region, the banking sector has been one of the hardest hit. PrivatBank has been labelled too big to fail, thus prompting the swift government intervention. The bank’s performance had worsened over the years due to the country’s problems, but also over irregularities in the management of the business. $3.9 billion have been lost as a result of unpaid insider loans.

Over the past two years, the Ukrainian government has been forced to close 80 banks that were found to be dealing illegally. The country is the recipient of a $17.5bn loan from the International Monetary Fund (IMF). “The government will allocate funds to stabilise the bank, and the required amount of financing for the recapitalisation of the bank have been earmarked in the budget… The budget parameters will remain within the targets set by the IMF programme,” said Finance Minister Oleksandr Danyliuk.