Privatbank should return Surkis family bailed-in money, court rules

Kyiv Administrative Court ruled on May 17 to charge from Privatbank UAH 1.06 bln of bailed-in funds from the Surkis family, Ukrainian News agency reported on May 23. The funds were deposited to the bank by members of Surkis family, whom the National Bank of Ukraine (NBU) recognized as related parties of the bank. On top of that, the same court ruled to charge from Privatbank UAH 0.36 bln of deposits of A-Bank (controlled by the Surkis family) which were also bailed-in last December. The court considered unlawful the recognition of A-Bank as a related party of Privatbank, Ukrainian News reported.

In its blog, the NBU commented that “it is outraged by recent court decisions regarding the alleged illegitimacy of … the bail-in procedure.” It insisted that the bail-in was run in full accordance with the law “On the system of the guarantee of deposits” and promised to appeal against the courts’ decisions.

Privatbank was declared insolvent on Dec. 19 and nationalized on Dec. 21. Between these events, the Deposit Guarantee Fund, based on information provided by the NBU, converted UAH 29.4 bln of the bank’s liabilities into equity. This amount included all the bank’s Eurobonds (PRBANK) and deposits of related parties.

Alexander Paraschiy: This looks like only the start of a legal battle between the NBU/government and the Surkis family. The court’s decision cannot be used as a precedent for the holders of PRBANK Eurobonds as they represent a different group of bailed-in entities – namely non-deposit unsecured lenders of the bank. At the same time, if the the Surkis family succeeds in recovering its bailed-in funds, it will make it easier for Eurobond holders to recover theirs in case they win in international courts.