Ukraine national bank not ruling out Privatbank nationalizaton, MP says

Serhiy Rybalka, the head of Ukraine’s finances parliamentary committee, told journalists on Nov. 11 that Ukraine’s biggest lender Privatbank (PRBANK) can be nationalized should its shareholders fail to fulfill its capitalization plan. “Privatbank will exist, but the question is who will be its owner,” he said, citing the words of National Bank of Ukraine Head Valeria Gontareva, with whom he discussed the matter.

In response to Rybalka’s statement, the NBU issued a statement explaining that it’s currently performing stress tests of Ukraine’s 20 largest banks and will determine their additional capital needs by the year end. By the end of 1Q16, the banks will have to take their first steps towards reducing insider lending. As before, the NBU will apply the necessary measures to those banks that don’t fulfill the regulator’s requirements. This standard will be applied to all banks, the NBU report said.

Alexander Paraschiy: It’s clear that all the banks that fail to fulfill the recapitalization plan have a risk of being declared insolvent, so there is little sensation in Rybalka’s statement. But what is important in his words is that in case Privatbank is declared insolvent, it will most likely be nationalized, not liquidated, as with other large insolvent banks.

As a base-case scenario, we expect the bank will remain solvent and in private hands, though the alternative scenario does not look adverse for the holders of the bank’s Eurobonds.

It’s also worth noting that it’s not the NBU that decides on the nationalization of banks – the central bank only can declare a bank insolvent.