NBU rejects majority of Oschadbank board members, criticizes CEO reappointment

The National Bank of Ukraine (NBU) reported on Aug. 16
that its qualifications committee rejected the appointment of five out of nine
members of the supervisory board of Oschadbank (OSCHAD). They consist of three
independent directors (including the chair and deputy chair), the Cabinet appointee
and parliamentary appointee. The regulator did not explain why it rejected
these appointments, only stating that the decisions were reached following
interviews conducted with them.

Recall, following the approval last year of a law on
improving corporate governance at state banks, they were required to form new
supervisory boards consisting of six independent members and three government
representatives (from the parliament, Cabinet and president). Oschadbank formed
its new board in accordance with the law in June 2019.

In the Aug. 16 press release, the NBU also expressed
its “deep concern” with the procedure used by the supervisory board, formed in
June, to extend a contract with the
bank’s CEO for five years. Namely, the regulator disagrees with the decision to
extend the contract without any competition, which contradicts “the spirit and
content of corporate governance reform” in the banks.

The same day, the Oschadbank press service issued a
response signed by eight supervisory board members, who called the NBU’s move
not objective and biased, as well as a threat to corporate governance reform in
the bank. The board members tied the NBU’s rejections to their decision to
reappoint the bank’s CEO (though they acknowledged that while eight board
members voted for the contract extension, not all of them were disqualified).

In the statement, they also stressed that the contract
extension was made in full accordance with the law and all the related
decisions were made in the presence of an NBU representative, who had no
objections. The board members called upon the regulator to provide reasons for
the five members’ disqualification so that they can move forward with appeals.

Alexander Paraschiy: As we noted, the
five-year extension of a contract with the Oschadbank CEO looked illogical and
not encouraging for the bank. Therefore, we agree with the NBU that this
decision went against the spirit of corporate governance reform. No matter how
this emerging conflict between the Oschadbank supervisory board and the NBU
finishes, we hope it will be positive for a state bank that urgently needs a
correction in its strategy and the way it is governed. If the conflict results
in a reshuffling of the bank’s top management, it will have positive
implications for its long-term future.