BY
On Monday 20th July Kyivska Rus” Bank,
insolvent since March 2015 must be liquidated – except that need not have been
the case – and indeed may at the 11th hour prove not to be the case, although
the clock is almost entirely run down.
It need not be the case, as since April 2015, a
large private UK investor with a global investment portfolio and exposure in
the Ukrainian market since 2007, has sought to purchase a transition bank –
that bank being Kyivska Rus” Bank. The transition bank was to, and perhaps
may yet, invest in agriculture, construction and energy businesses in Ukraine.
Aside from saving the nation UAH 2 billion in
losses – the State would otherwise have to pay about UAH 1 billion by way of
depositor guarantees and assume the loss of a UAH 450 refinancing loan provided
– those liabilities which would be assumed by the new owners. The UK
investors will also put $100 million into the bank activities, and thus into
the aforementioned Ukrainian markets that it has identified as of interest.
That matters have reached 48 hours before
liquidation of Kyivska Rus” Bank , and the issue has still not been
settled despite interest in the purchase 4 months ago, is simply due to the
usual unhelpful Ukrainian bureaucracy.
To be specific, the NBU (necessarily) changed
its rules after documents were submitted, and the Anti-monopoly which has a
role in the process, saw its head replaced (perhaps less necessarily).
Thus new documents were required to meet new
rules and a new anti-monopoly review conducted in line with new rules and under
new leadership.
To aggravate matters further, the creation of
transition banks – or not – seemingly lacks a certain amount of compatibility
amongst Ukrainian statute, unsurprisingly given the calibre of those that
create statute in Ukraine.
The Depositor Guarantee Fund requires an
investor to have the NBU approval to purchase the bank before it
is tuned into a transition bank. At odds with this, the Law of
Ukraine (On Banks and Banking Activity) requires this after the
bank has been created.
Needless to say, that whilst this bureaucratic
disaster is not going to turn away a UK private investor that has been in the
Ukrainian market for 8 years, it is certainly going to delay the investment
that was going to come via the transition bank – for if Kyivska Rus” Bank
is liquidated on 20th, the another suitable banking entity has to be identified
with debts that the investor deems acceptable to assume.
It is difficult to see how the Ukrainian economy
would not benefit from a few well funded international transition banks.
By Tuesday morning, we will know whether a
combination of finding wiggle room in the text of the relevant statues, and a
super-fast tracking of effort by the NBU and Anti-Monopoly Committee will have
saved the investment day and sent the right message to the private FDI
community – or not.
Can it be that a transition bank that is/was to
have $100 million to invest into the Ukrainian economy, will fail to
materialise due to a Ukrainian bureaucratic transition?
Something to watch for on Monday that probably
won’t make the headlines.
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