Privatbank's nationalization was inevitable but untimely – experts
Experts shared their predictions on the aftermath of the deal with LB.ua.
The nationalization of Ukraine's largest bank, Privatbank, will benefit its owners and big depositors while regular taxpayers will lose. The bank's transfer under state control was inevitable, however the process took off at the wrong moment, experts interviewed by Gorshenin Institute have suggested.
Roman Shpek, the former economic minister and head of the Independent Bank Association of Ukraine, has pointed out that Privatbank's nationalization is happening in a peaceful and civilized manner, which is important to the stability of the country's financial system.
"There will be positive consequences because trust in the financial market will stay and there will be no room for any panic sentiments. Everything has its price and by entering the capital, the state will have to invest. However, in this whole story I was most happy to hear that once the capital is restored in accordance with the norms, the government as the owner will consider an option of inviting a private investor, meaning the bank's privatization. Who can it be? It depends on the situation in the country – on what is happening with corruption, the tax system. This is a big chunk and it should involve some serious players. If reforms take place, the legal and judicial systems will change, there will be some results in tackling corruption, such players can come. When there is a hi-tech bank which has a big market share, it can be quite interesting," Shpek said.
Former Economic Minister Viktor Suslov expects Privatbank's clients and owners to win from the bank's nationalization. "They will win because they managed to put their huge debts on the state. Because there is going to be a huge issue of money to top up Privatbank, there will be a hike in prices and further devaluation of the hryvnya, and common Ukrainians, who are not the owners or depositors of Privatbank, will pay for this 'party'," Suslov said.
According to First Deputy Finance Minister Ihor Umanskyy, Privatbank should be saved as a systemically important institution.
"The bank is the country's largest and truly systemically important bank with over half of individuals and legal entities keeping their money or being serviced by Privatbank whose real capital for today, according to the NBU estimates, is minus 146bn hryvnyas. It would be catastrophically wrong to remove it from the market as far as the system is concerned. No-one would possibly dare to predict the consequences and level of a possible catastrophe. Therefore the decision was taken to nationalize the bank, which effectively means saving it and keeping it in operation. As a result, on the one hand, a systemically important institution is saved, and, on the other hand, not only individuals' deposits, which are safeguarded by the Deposit Guarantee fund, but also those of legal entities are saved. I cannot see any systemic risk from the nationalization if [the government] enters the bank and manages it in a professional manner, and if a proper team is selected for the management and supervisory board. This team will have to ensure a smooth transition and change of owner to ensure the bank's operational and other activities," Umanskyy said.
Vadym Pushkaryov, former board chairman of VTB Bank, described the NBU's decision as untimely.
"When there is war, territories and businesses have been lost, when economic relations have been disrupted and basic industries – metal, chemical, engineering and precision engineering - have shrunk for objective reasons, the number of clients inevitably decreases, including loaners, and this affects the capital of any bank, including those with foreign capital. In these conditions, it is a little untimely to fight for the purity of capital in the banking system. On the contrary, one must give as much support as possible, extend preferences, control but care about what you have. Because a huge number of remaining businesses is faced with additional risks emerging as a result of this 'fight for the purity of capital'. It is the same as if you take an airtrooper with pneumonia and put a 40-kg load on him, give him a machine gun and make him run for 25 km," he said.
According to Pushkarev, Privatbank's nationalization will first tell on regular taxpayers. People will face additional exchange risks, additional risks to their deposits and business, liquidity risks to the banking system as such.