There are lots of names are being put around as candidates to replace Yakiv Smolii, who resigned on July 1. I thought it useful perhaps to put a market perspective on some of the names being mentioned for this key position to be appointed by President Volodymyr Zelensky and ratified by the Verkhovna Rada, Ukraine’s parliament.
First, let’s start off with the market favorites:
Kateryna Rozhkova
The acting governor and you could perhaps say she is in the driving seat as now incumbent and will remain as governor for as long as the Rada cannot get a majority to agree on a replacement. She is hated by the old school banking establishment because she closed many of their pocket banks down. Unfortunately, this old boys club is still very well represented in the Rada which means that it is likely to choose someone, anyone, to replace Rozhkova and ASAP. Rozhkova has proven to be an able and dedicated technocrat, well respected within the National Bank of Ukraine, in the international financial institution communities and the market. Her remaining in place at this stage would be a very good scenario for the market. The question is whether she will stay on as first deputy governor if a market and NBU unfriendly candidate is chosen as governor.
Vladyslav Rashkovan
He is an ardent and proven reformer, of the blue-sky thinking type. He will further push on with reform at the NBU, which likely means he won’t be chosen as governor. Likely he will struggle to win a Rada majority as he will face the same banking vested interests so desperate to get rid of Rozhkova. Likely keeping his powder dry for a big and transformative future role.
Dmytro Solugub
The deputy governor and chief economist the NBU, he is a really capable technocrat and economist. Has quickly matured into the position as deputy governor and would be seen by the International Monetary Fund and market as a worthy replacement for Smolii and Rozhkova. A slightly better chance than Rashkovan of winning Rada approval, but a long shot as they say.
Volodymyr Lavrenchuk
The former chairman of Aval Bank, who had been seen as the favorite to replace Valeria Gontareva, but neither him nor ex-President Petro Poroshenko could line up their ducks at the time, and I just think he missed his chance and is unlikely to want the job second time around. Would be seen as a decent choice by the market but would also struggle to get Rada backing.
Oleksandr Danylyuk
A former minister of finance and former head of the National Security and Defense Council. A proven reformer, trusted by the IFIs and the market. A late entrant to the list of candidates for the post of the governor but he left the NSDC with all guns blazing (figuratively speaking) so that I struggle to see Zelensky taking him back, or whether he could win majority Rada backing. Also not sure that NBU governor is the best fit for his very particular set of political skills – a job as head of the presidential administration probably would be a better use of his considerable talents.
I would also mention ex-Economy Minister Timofiy Mylovanov and ex-Finance Minister Oksana Markarova in this market favorite category, but as I understand it they are barred for re-entering public service for a year after having left office.
The best chance of retaining the NBU board as is, keeping the market and IMF happy, will come with the confirmation of Rozhkova, Rashkovan, Lavrenchuk, Solugub or Danylyuk as governor.
Indeed, there are plenty of decent, very capable technocrats who could do a great job at the NBU.
Ex-Prime Minister Arseniy Yatsenyuk has also been mentioned in dispatches and might well be a compromise candidate between the two wings, but I struggle to see Zelensky hiring a political competitor and someone whom he cannot be sure to follow the presidential script. He might prove overly independent. He has reform credentials and is a decent economist with NBU experience. He served as acting governor previously for a short stint, and would I think be appreciated by the G7 and the IFIs. But I still cannot see Zelensky nominating him, and struggle to see the Rada backing him.
Most of the other names mentioned in dispatches raise concerns over NBU independence and the existing NBU board might not wait around long should some of the following names be confirmed as governor:
Serhiy Kryuglyk has suddenly emerged as the new favorite to succeed Smolii or this seems to be the script being pushed by the old school banking and industrial lobby.
If his team were really responsible for using my name, and that of Swedish economist Anders Aslund as his backers as per this piece in the local media, that would rule him out in my view a being suitable for the job. I have not backed him for the job, and neither has Aslund.
I have met him a couple of times when I think he was head of protocol at the NBU. But it’s a huge move from protocol to being NBU governor, and it is hard to see him as being an upgrade on Smoliy or any of the reform names mentioned above. His face likely would fit with the industrial and banking lobby, but it worries me that the talk is that he is being pushed by the likes of Serhii Lyovochkin and Dmytro Firtash.
Kyrylo Shevchenko
The head of Ukrgazbank had seemed like Zelensky’s number one choice to replace Smolii a week or so ago, but his star and support seems to have waned in recent days, but I am not sure entirely why.
Bohdan Danylyshyn
The head of the NBU Council, and a constant thorn in the side of the current NBU board. He has pushed the alternative macroeconomic policy agenda of looser monetary policy, a more competitive currency, and take it or leave it approach with the IMF. He would likely get Rada backing but might suggest looming problems with the IMF, the existing NBU board and the market.
Ihor Umansky
He lasted I think only 30 days as finance minister, hired by Zelensky, but I cannot see Zelensky trying him at the NBU after the experience at the Ministry of Finance. His face would fit the script of the industrial and banking lobby though and likely he would get Rada backing as a result.
I sense the current NBU board might stay around a while to fight something of a rearguard action to counter the looser monetary and exchange rate policy script plus unwind of banking reforms which Bohdan Danylyshyn, Kryuglyk, Umansky and even Shevchenko are likely to favour, but I wonder just how long they can tolerate extreme pressure from the new top NBU leadership, the presidency, the Rada and the banking and industrial lobby, especially with weak support from the IFIs. Guess the hope might be for Biden win in November, and then a new US administration focused back on pushing the reform agenda in Ukraine. So guess for Rozhkova, Churiy, Solugub et al it would be a question of lasting it out for six months plus.
Just to conclude that the choice of the governor is critical not only for the future outlook for monetary and exchange rate policy but also banking sector reform, given the NBU leadership has signoff on management and supervisory boards across the banking sector. Hence a sea change in outlook coming with a new governor would also have similarly far-reaching impact on the banking sector.
