National Bank Governor Valeriya Gontareva sits for an
interview with the Kyiv Post in Kyiv on June 21. Photo by Volodymyr Petrov
The National Bank of Ukraine, hailed by Western
creditors as a standout success story in reforming the country’s financial
sector, has had its independence threatened in recent weeks.
A group of
parliamentarians submitted a draft law that would curb the bank’s powers just
days after former tycoon and Donetsk governor and now lawmaker Serhiy Taruta
distributed a pamphlet at an International Monetary Fund conference accusing
NBU Governor Valeriya Gontareva of corruption.
IMF Ukraine Country
Director Jerome Vacher made an oblique reference to the attack in an Oct. 18
remark at the Norwegian-Ukrainian Business Forum in Oslo, warning that vested
interests are trying to reverse critical reforms important to the fund’s
lending program to Ukraine.
“We see that now in
legislative attempts to limit the independence of the central bank and the
powers of the Deposit Guarantee Fund,” Vacher said. “So it’s a concern and a
constant struggle.”
Dangerous
legislation
Lawmakers submitted a
draft law to parliament on Oct. 10 that is designed to amend the laws on the
NBU and the economic, civil and administrative codes of procedure.
If adopted, the law
would significantly limit the NBU’s independence. Given that the independence
of the central bank is one of the requirements in the memorandum between
Ukraine and the IMF, the move might jeopardize Ukraine’s relations with its
Western creditors.
The document is
co-authored by Oleh Lyashko, two other lawmakers from his Radical Party –
Serhiy Rybalka and Viktor Galasiuk, pro-presidential Bloc of Petro Poroshenko
faction lawmakers Leonid Kozachenko and Mykhaylo Dovbenko, Maksym Polyakov from
the People’s Front faction, and Oleh Lavryk from the Samopomich faction.
An explanatory note of
the draft law, published on the parliament’s website, states that “the
contradiction between the extremely powerful levers concentrated in the
National Bank of Ukraine and the absence of the mechanisms that would
guarantee” that it is working in the public interest cause systemic problems
both in Ukraine’s banking system and its entire economy.
According to the bill’s
drafters, an independent central bank has resulted in “uncontrollability and
irresponsibility that has caused “huge financial losses.”
The draft law suggests
dismissing the NBU head and deputy heads, to make the process of appealing
against NBU rulings easier, and to make support for stabilizing the exchange
rate the central bank’s main function.
In an official statement
published on its website on Oct. 18, the NBU criticized the draft law, calling
it a populistic move, and an effort to terminate reforms in the financial
sector and prevent the NBU from reducing inflation.
The NBU also appealed to
President Petro Poroshenko, asking for support on the issue.
While the president has
kept silent on the matter, the NBU has received support from Ukraine’s 12
biggest banks, including Raiffeisen Bank Aval, UniCredit Bank and OTP Bank. In
a joint letter, the heads of the banks said the draft law endangers the financial
stability of Ukraine.
The only big bank that
did not step up was Ukraine’s largest PrivatBank, owned by billionaire Igor
Kolomoisky. Privat did not reply to a request for comment.
Serhiy Fursa, an analyst
with the Dragon Capital, was not surprised that PrivatBank did not sign the
letter, as he believes its management is lobbying for the draft law.
He said other players
that might be interested in attacking the NBU are: “populists that just use the
situation as a reason, a flag; part of the insurance business, because soon the
NBU is to take the control over the insurance market and clean it just as it
did with the banking sector; embattled oligarchs that today in fact owe money
to the NBU, as they gave personal guarantees for their banks, which have now been
taken off the market, and they are now trying to evade taking any form of
responsibility for this, including financial responsibility; and, of course,
PrivatBank, which is fighting against being nationalized.”
Fursa spoke out against
the draft law, saying it was “one of the stones that are being thrown at the
NBU.”
However, he said the
chances of the draft law being adopted were very low, and even if it gets
passed in the Verkhovna Rada, it would probably be vetoed by the president.
Compromising
pamphlet
The first volley in the
attack on the NBU came not in Kyiv, but in Washington D.C.
From Oct. 7 to 9, the
IMF held a series of annual meetings in which bankers from around the world
gather in the U.S. capital.
At the meetings, a
pamphlet entitled “Gontareva: A threat to the economic security of Ukraine” was
distributed to attendees.
The pamphlet makes the
claim that Gontareva is one of the “most destructive forces in the Ukrainian
economy.” To that end, the document offers a history of Gontareva’s career that
casts her as a “wicked stepmother” of Ukraine’s financial system. The pamphlet
then runs through a litany of accusations that Gontareva has abused her
position as the head of the central bank for her own enrichment.
Some of these
allegations – including questions over bond purchases during Gontareva’s time
as head of Investment Capital Ukraine – have weight, and have been investigated
by journalists covering the bank.
The NBU responded to the
pamphlet in an Oct. 14 press release, accusing oligarch and parliamentarian
Serhiy Taruta of spreading the materials. The bank demanded that criminal
proceedings be launched against Taruta for slander, calling the pamphlets part
of an “information campaign aimed at discrediting the NBU’s governor.”
“Instead of engaging in
a constructive dialogue with foreign partners and friends of Ukraine, these
oligarchs resort to fabricating insinuations and dirty provocations,” Gontareva
said in a statement.
“They shamelessly
distributed false information even at an IMF meeting.”
Kyiv Post staff writers Josh Kovensky and
Alyona Zhuk can be reached at kovensky@kyivpost.com and zhuk@kyivpost.com
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