The National Bank of Ukraine (NBU) has said that it intends to file an appeal in cassation against the court rulings that overruled the NBU’s ordinance to inspectPrivatBank prior to the bank’s resolution.
In particular, on 13 May 2019, the Sixth Appellate Administrative Court rejected the NBU’s appeal against the ruling of the Kyiv District Administrative Court dated 2 March 2018 that satisfied the lawsuit filed by the Cyprus-based company Triantal Investments Ltd – PrivatBank’s former shareholder.
"The NBU does not agree with the court’s ruling and intends to file an appeal in cassation. The procedure and grounds for the conduct of scheduled and unscheduled inspections of banks are stipulated in the relevant Regulation of the NBU. If a bank’s financial standing is found to have materially deteriorated, it gives the NBU grounds to conduct the necessary inspection," Viktor Hryhorchuk, Head of Litigation at the NBU Legal Department, said. “The regulator prioritises the inspection of banks – systemically important banks in particular – as one of the steps in ensuring Ukraine’s financial stability, which the law compels the NBU to promote. That is precisely why it is necessary to take a prudent approach to resolving disputes that question the legitimacy of the NBU’s supervisory actions."
The NBU insists it had grounds to inspect PrivatBank in 2016, as the bank had failed to implement the financial rehabilitation program agreed with the bank’s shareholders and management. This is confirmed by the written statement by the bank’s former shareholders and is proof that they failed to meet their commitments.
The inspection of PrivatBank before it was declared insolvent and its government-assisted resolution revealed that the bank failed to implement its restructuring plan and that the bank’s capital was insufficient to meet the required capital and credit risk coverage ratios. This conclusion is supported by the paperwork from the inspection and by an independent, internationally recognised audit firm hired by PrivatBank.
As part of fulfilling its mandate to promote financial stability and the stability of the banking system in particular, the NBU declared PrivatBank insolvent and proposed to the government to participate in the bank’s resolution by selling the bank to the Ministry of Finance of Ukraine.
"Appealing the regulator’s decision to inspect PrivatBank is part of a push by the bank’s former shareholders to appeal the entire procedure under which the bank was resolved. Please be reminded that the decision to implement the government-assisted resolution of the insolvent PrivatBank was made in accordance with applicable law and supported by the National Security and Defence Council of Ukraine, the government of Ukraine, and its international partners with the aim to ensure financial stability and to safeguard the funds of the public. The legitimacy of these decisions is obvious, and they cannot be reversed, as there are no legal or economic grounds for such a reversal," Hryhorchuk added.
The NBU will continue to prove the legitimacy of its actions. Such court rulings pose a threat to Ukraine’s financial stability, the NBU believes.