Ukraine media speculate on NBU board reshuffling

16 October 2020

Ukrainian media have been actively speculating in recent days on the possible reshuffling of the executive board of National Bank of Ukraine (NBU), which could have been done as soon as on Oct. 16, when the NBU Council was going to convene its next meeting. The meeting was cancelled this morning, without any reasons offered. Recall, the council's last meeting in early October ended in the scandalous reprimands of two NBU board members, Kateryna Rozhkova and Dmytro Sologub, the only top executives with tenure of over three months.


Rozhkova and Sologub could have been dismissed at the NBU Council meeting on Oct. 16 (rescheduled from Oct. 13), according to an Oct. 13 report of news site. A report on news site on Oct. 15 confirmed that the council was going to vote on Oct. 16 for the dismissal of Rozhkova, but less likely for the dismissal of Sologub. Further on, speculated on Oct. 15 that Rozhkova and Sologub would receive notices of suspicion in committing crimes from the Prosecutor General's Office, and would be dismissed by the council on Oct. 16. The news site went further, alleging that “the IMF did not provide its consent to dismiss Rozhkova." So in case she is dismissed, the council’s chairman Bohdan Danylyshyn (who is among the fiercest opponents to Rozhkova and all the “old” NBU board members) will be also replaced, as well as another council member, Vitaliy Shapran, who distinguished himself for his ridiculous comments about the scandalous reprimands.


Recall, NBU Council has the authority to appoint and dismiss deputy NBU governors, at the request of the NBU governor. The NBU executive board, which consists of the governor and five deputy governors, adopts all its decisions based on a majority of votes. The current board consists of four members appointed over the last three months, including the governor Kyrylo Shevchenko, in addition to its two remaining members (Rozhkova and Sologub) appointed under the presidency of Poroshenko. Rozhkova, responsible for banking supervision, is known for her active role in declaring insolvent the scandalous Privatbank and its further nationalization. Sologub, responsible for monetary policy, is known for leading policies that were considered to be consistent and understandable for IFIs.


Rozhkova also gave an interview to the news site on Oct. 12, published on Oct. 15, in which she rejected any grounds for her being reprimanded by the NBU Council. She also criticized the NBU governor for his One Voice communications policy, which she was blamed for breaching, stating that it should not be applied as a Single Voice policy instead. Interestingly, she also stated that she talked to the governor on Sept. 10 for the last time. She also said that her theoretical dismissal won’t change the situation with Privatbank, which is actively suing its former owners.


Alexander Paraschiy: The cancellation of the council’s meeting seems to be an interim victory for Rozhkova after pressure on the council members from local pro-Western media, which in turn likely generated intensified pressure from Ukraine’s Western partners. The common thread in all the media reports about the possible reshuffling at the NBU is: 1) it is likely that Rozhkova (and less likely, Sologub) will be dismissed soon, and 2) Ukraine’s financial partners do not support the dismissal of the two “old” NBU board members. Meanwhile, not all the media reports look consistent or true.


In our view, the dismissal of Rozhkova (who is ready for that outcome, taking into account her comments to should not spoil much the NBU's relationships with the IMF or other Western creditors. Rozhkova’s role as “guarantor of the NBU’s independence” looks overestimated, while her role in her “key project,” Privatbank’s fight against its former shareholders, is not high now, as she has confirmed.


However, Sologub’s possible dismissal will be different, as it might radically change the NBU’s monetary policy, therefore throw into question the NBU’s independence and spoil Ukraine’s relationships with IFIs. The low chance of the same monetary policy being maintained without Sologub is prompted by the fact that the head of NBU Council Danylyshyn (who is a fierce advocate of the NBU printing money to finance a large budget deficit) won’t accept a vote for a new NBU executive who will share Sologub’s view. From this standpoint, the allegations of the news site – that the "old" NBU board members will be replaced together with Danylyshyn – could be a compromise for the IFIs, as this would increase slightly (but not necessarily) the chance for continuing the current careful monetary policy. 


All in all, we continue to believe that the dismissal of Sologub is only likely in case Ukraine's power brokers are sure there won’t be an IMF deal in the nearest couple of months. Meanwhile, we do not rule out a soon dismissal of Rozhkova, who is apparently acting as a lame duck in the NBU. Also, a possible dismissal of Danylyshyn could be a bonus for Ukraine-IMF relations, in our view.

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