Ukraine move to nationalise its largest bank welcomed by IMF
Ukraine is nationalising its largest bank following concerns over its stability in a move welcomed by the International Monetary Fund (IMF) and the European Union.
The cabinet agreed to move PrivatBank into full state ownership, saying the move was carried out "in close coordination with international financial organisations" and with the consent of PrivatBank's owners - an apparent reference to the oligarchs Ihor Kolomoisky and Hennady Boholyubov, who together control more than 90pc of the bank.
Ukrainian president Petro Poroshenko said the decision "saved both the bank and the banking system" in Ukraine. He said PrivatBank lacked capital and had been hit hard by the conflict in eastern Ukraine and the accompanying economic crash in 2014 and 2015.
"It is obvious that the only way to save the bank, and its customers' money, was to make it state property," Mr Poroshenko said.
"The alternative would appear irresponsible because it would mean closing our eyes, hiding our heads in the sand and waiting for the bank to fail."
Mr Poroshenko said he had submitted a bill to the Ukrainian parliament pushing for additional deposit guarantees for the bank's customers.
"I say to the customers of PrivatBank - remain calm," he said.
There were no obvious signs of panic after the move in the capital, Kiev, or of lengthy queues outside branches of Privatbank, which dominates Ukraine's retail banking sector.
PrivatBank and its owners have yet to comment. Last week, PrivatBank dismissed talk of nationalisation as an "informational attack" aimed at destabilising Ukrainian politics.
IMF president Christine Lagarde said: "Today's decision of Ukrainian authorities to nationalise PrivatBank is an important step in their efforts to safeguard financial stability.
"It is now important that the process of nationalisation be followed by firm efforts to maximize the repayment of related-party loans, and the appointment of an independent management team to restore the bank's viability, minimising the cost to the state and taxpayers in line with existing legislation and international best practice."
The EU's top foreign policy representative, Federica Mogherini, praised the "bold and courageous decision to nationalise PrivatBank," adding that it would strengthen regulation and help other EU-backed reforms.
Over the last two years, Ukrainian authorities have made a concerted effort to clean up the banking sector, closing dozens of so-called zombie banks. Many had been accused of involvement in money-laundering or related-party funding schemes, whereby people connected to the bank's management siphon off money via loans.