Ukraine Nationalizes Largest Bank as Possible Economic Collapse Looms
Privatbank, worth $6 billion, has been taken over by the Ukrainian government in a shock move
The government of Ukrainian President Petro Poroshenko has suddenly announced the nationalization of Privatbank, owned primarily by oligarch Igor Kolomoisky. The bank holds nearly $6 billion in private deposits accounting for 36.5% of all private deposits in Ukraine.
Ukraine took over its largest bank on Monday in a move backed by Kiev's international donors to protect the country's financial system and accompanied by an appeal for calm and assurances to depositors from President Petro Poroshenko.
In one of the biggest shake-ups of the war-torn country's banking system since Ukraine plunged into economic and political turmoil more than two years ago, the central bank said that PrivatBank had not fulfilled its recapitalisation programme.
Risky lending practices had left a capital shortfall of around $5.65 billion on PrivatBank's balance sheet as of Dec 1, while some 97 percent of its corporate loans had gone to companies linked to its shareholders, it said in a statement.
PrivatBank is the jewel in the crown of the business empire of Ihor Kolomoisky, a powerful tycoon who was locked in a protracted tussle with Poroshenko last year.
The unprecedented bailout could fuel instability in Ukraine, where opposition parties have repeatedly called for snap elections to unseat the pro-Western leadership that took power after the 2014 Maidan protests. As Reuters notes, the opposition has harnessed the anger of depositors from banks that were previously shut down in a sweeping cleanup of the financial system, mobilizing rallies and demanding the central bank chief's resignation.
The nationalization announcement came just days before parliament was to vote on next year's budget, which must stick to a shortfall of 3 percent of economic output, as agreed with Ukraine's international backers.
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