Ministry of Finance and National Bank expel Rodovid Bank from market

On February 25, the executive board of the National Bank of Ukraine adopted a decision, agreed with the Ministry of Finance, to declare the JSC Rodovid Bank insolvent and to transfer its assets to the State Deposit Fund.

This decision is in line with the Development strategy of state-owned banks which was adopted on February 11, 2016.

The JSC #Rodovid_Bank was transferred to state property in 2009, in 2011 it was declared subject to financial recovery procedures. However, 7 years afterwards the bank did not succeed in settling its bad assets, nor could it elaborate a successful recovery plan. Now it can’t operate without state support. To use state property and state budget funds properly, it was decided to terminate Rodovid Bank operations.

Background

The JSC Rodovid Bank was severely affected by the financial crisis and got incapable to serve its customers. In March 2009, temporary external administration took over the operational management of the bank. In 2009, the Government decided to provide additional capital to the bank amounting UAH 8.4b. The bank received further UAH 3.95b from the state in 2011. As a result of that step, the state share in the capital of the JSC Rodovid Bank increased to 99.9%.

Thus, in the period from 2009 till 2011 Rodovid Bank received state funding totaling UAH 12.35b which was aimed to stabilize the Ukrainian banking system and to protect banks’ customers. This state support helped the bank pay out almost UAH 10b to its customers as well as to the customers of Ukrprombank whose deposits had been transferred to Rodovid Bank.

Starting from 2011 the JSC Rodovid Bank was subject to financial recovery procedures in accordance with the order of the Cabinet of Ministers No. 880-r of September 14, 2011, the decree of the National Bank of Ukraine No. 471 of December 23, 2011, and licence of the bank operating under financial recovery procedures No. 1 of June 15, 2012.

The objective of the bank at that time was to operate effectively with state-owned bank assets and to re-pay the received state funds within 5 years.

Unfortunately, the objective was not achieved. First, no legislative framework was created to set up a mechanism for the transfer and sale of the bad assets of state-owned banks, which is necessary for the effective operation of banks under financial recovery procedures. Second, the performance of Rodovid Bank with its own assets under financial recovery procedures was low. When operating under financial recovery procedures, the bank only managed to generate revenues sufficient to cover its administrative costs, the state did not receive any dividends.

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