Notice of the Ministry of Finance regarding the status of PrivatBank’s loan portfolio restructuring by former owners

7/2/17

The deadline, when former UBOs of PJSC CB PrivatBank (hereinafter referred to as PrivatBank) had unilaterally committed to restructure the Bank’s loan portfolio, passed on 1 July 2017.

Previously, in response to missing restructuring efforts of former owners, PrivatBank engaged a consortium of companies Rothschild, EY, and FinPoint to accelerate negotiations on restructuring of the loans granted to former owners or/and the parties that were directly or indirectly related to them. The consortium is expected to submit the final report very soon. After it is thoroughly studied, the decisions would be taken as to further steps. However, according to the information, currently available to the Ministry of Finance, no significant progress has been made towards restructuring. Instead, we are observing a coordinated legal and media campaign against the interests of the state.

Meanwhile, to ensure transparency of the process, the Ministry of Finance is publishing the letter, which was sent by the Bank’s former owners on 16 December 2016 to the government requesting the state to purchase the Bank’s shares and take a positive decision as to its further recapitalization. It was done to avoid the Bank’s bankruptcy.

When requesting the government to step in, the former shareholders of the Bank unilaterally committed themselves to support the Bank’s nationalization process, not to put pressure on the government agencies and the new management of the Bank, not to prevent the Bank’s operations in the future, and to undertake restructuring of the loan portfolio by 1 July 2017 in order to compensate losses to the state.

Based on the proposal of the National Bank of Ukraine, the decision of the Financial Stability Council, in view of the decision of the National Security and Defence Council as of 18 December 2016, enacted by the Presidential Decree on 18 December 2016 № 560, and taking into account the request of PrivatBank’s owners, at its session on 18 December 2016, the Cabinet of Ministers of Ukraine adopted the decision on the state becoming PrivatBank’s shareholder.
According to this decision, 100% of the Bank’s shares are owned by the state represented by the Ministry of Finance.

The PrivatBank’s nationalization was needed to save the Bank and ensure financial and economic stability of Ukraine, as resolution of the largest bank in the country, where more than 20 million of Ukrainians held their deposits, and through which more than 60% of all retail payments were channelled, could have destabilized Ukraine’s financial system and had a significant adverse effect on the entire economy. In view of these systemic risks, and the guarantees given by the former owners to facilitate the process and to cover state losses, the decision was made to nationalize PrivatBank.

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