NBU Council reprimands two key NBU board members

6 October 2020

The Council of the National Bank of Ukraine (NBU) at its Oct. 2 meeting voted to reprimand deputy NBU heads Kateryna Rozhkova and Dmytro Sologub, as well as declare its distrust in them, the NBU reported on Oct. 5. The council blamed Rozhkova and Solohub for violating the NBU’s internal acts and code of conduct, as well as Ukraine’s labor legislation.


All but two members of the NBU Council supported the vote, including NBU governor Kyrylo Shevchenko, Interfax-Ukraine reported, citing an anonymous source. Among the possible triggers for the move against Sologub was his interview to Interfax-Ukraine published two weeks ago, the source said. In that interview, Sologub stated that the NBU “needs to build the trust of the IMF practically from ground zero,” possibly implying that July’s replacement of the NBU governor has resulted in the IMF losing trust in the regulator.


The NBU Council – consisting of nine members (including the NBU governor, four appointees of parliament and four appointees of the president) – is responsible for the development and supervision of the NBU’s monetary policy. It also acts as the supervisory and controlling body of the NBU. It dismisses and appoints deputy NBU governors, at the proposal of the governor.


Rozhkova, responsible for banking supervision, and Sologub, responsible for monetary policy, are the only two NBU executive board members who have kept their positions since the election of President Zelensky. Four other NBU board members, including the governor, were replaced in July-August 2020.


NBU Councilmember Vitaliy Shapran, who was an initiator of the vote against Rozhkova and Sologub, according to Interfax-Ukraine, commented that the council’s decision was “rather educational” and has no legal consequences. He recalled that the council cannot dismiss NBU board members without the initiative of the NBU governor.


Alexander Paraschiy: Such an “educational” move of the council may have in fact consequences for Rozhkova and Sologub. Primarily, it illustrates that Shevchenko is not very happy with their work. Second, the sole fact of the reprimand being issued (whatever its legality is) may mean that the two have lost their “impeccable reputation." By law, such a loss is among the few reasons to dismiss a deputy NBU governor. All this means that on any day, Rozhkova and Sologub can be dismissed by the NBU Council at Shevchenko’s initiative.


This could also be the latest episode in the Zelensky administration’s tactic in removing top officials, holdovers from the Poroshenko presidency, who behave independently and are supported by IFIs. This involves adopting ambiguous decisions that throw into question their future (recall the situation with NABU director Artem Sytnyk, whose appointment was declared illegal). Besides being able to dismiss such people any time, the president's office may even try to “exchange” their remaining in their posts for some benefits from “Western patrons.” Either option is unproductive, and only distracts Ukraine’s Western partners.


Incidentally, it's the very dismissal of Rozhkova and Sologub, the only NBU board members who have long-standing relations with the IMF, that will reduce the fund's trust in the NBU to “ground zero," as stated by Sologub, who estimated in the interview that it will take six to nine months to rebuild its trust. Therefore, their dismissal is unlikely in the nearest future, or for as long as there is a chance to get the next IMF tranche.


Nonetheless, the mere fact that their future in the NBU is unclear – as with the future of the current monetary policy (led by Sologub, who is endorsed by the IMF as independent) – risks worsening Ukraine-IMF relations and adds another argument to delay the nearest tranche. All in all, this brings some more negativity to Ukraine’s investment case and outlook for productive relations with IFIs.

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