Ukraine’s central bank governor has insisted that the government will fight any moves by oligarch Ihor Kolomoisky to regain control of Privatbank. The issue has become one of the top concerns for the International Monetary Fund and other investors in Ukraine.
Privatbank, which had been owned by Kolomoisky and his business partner Gennadiy Bogolyubov, was nationalised in 2016 at the behest of the IMF because of a $5.5bn hole in its balance sheet.
Since then, the businessmen have been fighting to get the bank restored to them or to obtain compensation, through a legal battle in jurisdictions around the world, including London, New York, Switzerland and Cyprus.
In the latest skirmish, a London court ruled in favour of the National Bank of Ukraine (the central bank) and Privatbank. That allowed Privatbank to pursue a $3bn claim against its former owners. However, the pair have launched appeals, which will be heard next week.
Kolomoisky and Bogolyubov are accused of a fraud that led to the balance sheet hole. They deny this and claim the bank was nationalised illegally.
Yakiv Smolii, the NBU governor, told GlobalMarkets that the 2016 nationalisation was legal. “Current legislation does not permit for the possibility of returning the bank to its previous owner,” he said.
In the Ukrainian courts, a verdict is expected on October 24. A preliminary hearing scheduled for October 17 was delayed, apparently to allow Ukraine’s negotiations with the IMF in Washington to be conducted uninterrupted.
The proceedings in Kiev are an appeal against a decision in favour of Kolomoisky in April. Smolii said the NBU would appeal to the supreme court if it lost.
However, the issue has taken on deeper significance since the election of Volodymyr Zelensky as president in April.
Zelensky had been an actor on a television show broadcast on a station owned by Kolomoisky. Observers fear the links between the two could make it easier for Kolomoisky to prevail in the Privatbank battle.
Graham Stock, head of EM sovereign research at BlueBay, said the IMF’s trust in the Ukraine government had been shaken. “We believe that any assistance for Kolomoisky would be a serious problem for the Fund and other donors in Ukraine,” he said. “The nationalisation of Privatbank was a key step forward in the anti-corruption movement, and any unwind of that would be very serious. It’s the number one issue for the Fund in Ukraine at the moment.”
An emerging market-focused investor said: “Frankly, I expect the NBU to lose the appeal. The worry is that the courts in Ukraine are not sufficiently independent. There has been a longstanding problem of corruption there, and it seems that Kolomoisky has some kind of relationship with President Zelensky.”
In September, Zelensky met Kolomoisky and Ukrainian prime minister Oleksiy Honcharuk alarmed investors by announcing he was seeking a “compromise” with Kolomoisky over Privatbank.
The IMF declined to comment. However, following the April ruling against the NBU, Goesta Ljungman, IMF representative in Ukraine, reiterated the IMF’s support for the nationalisation of Privatbank and the reform of its corporate governance.