NBU recognizes bank insolvent for the first time since 2018

Ukraine’s National Bank (NBU) recognized Ardaka Bank
as insolvent, according to its Aug. 25 press release. The decision was based on
the decrease of the bank’s capital to a negative value, the NBU reported. This
happened because a creditor of the bank foreclosed on its main office (which
accounted for 27% of the bank’s total assets) in a transaction that the NBU
considers as illegal. The bank was 45th among Ukraine’s 75 banks by size of
total assets, which were UAH 1.9 bln as of end-June (0.09% of the banking
system’s assets). As of end-June, the bank held 403 mln of individual deposits
(0.06% of the banking system) and the NBU reported that UAH 285 mln of the
deposits are guaranteed.

The bank is known as a financing partner for large
residential construction projects in Kyiv, through which development firms have
accumulated about UAH 9 bln funds from individuals, with a lot of the
construction projects (over 30 multistoried buildings) failing to be completed.

Before Arkada case, the latest bank that was
recognized insolvent in Ukraine was VTB Bank in November 2018.

Alexander Paraschiy: The Arkada
case is definitely not the beginning of new wave of banking failures in Ukraine
as its bankruptcy is the result of a long-lasting affair in the construction
business, which is an area not under the control of the central bank. However,
the bank’s insolvency might have a negative impact on political rating of Kyiv
mayor Vitali Klitschko whom the “defrauded investors” of Arkada-related
projects might blame for their problems. Klitschko has reacted quickly, promising
on Aug. 26 that another Kyiv-based developer will consider options to complete
the construction of Arkada-related buildings and will offer some solutions to
the investors. Although a solution to the problem is unlikely to be found by
October’s mayoral elections, such a move is likely to preserve Klitschko’s high rating in Kyiv.