Could billionaire oligarch Ihor Kolomoisky take back PrivatBank, the insolvent institution taken over by the state on Dec. 18?
The scheme could be simple: wait several months until the National Bank of Ukraine recapitalizes PrivatBank, filling the multibillion-dollar gaps in the financial institution’s ledger. Then, through a court case disputing the nationalization’s legality, he could reclaim control of a freshly recapitalized bank.
Such a plan would build on courtroom victories in recent months from the former owners of so-called “zombie banks” – banks that were declared insolvent by the NBU, but then brought back to life by lawsuits from the same people who bankrupted the institutions in the first place.
The question is – could Kolomoisky do the same, but on a much larger scale?
Return of zombies
Since 2014 the NBU has closed more than 80 banks. Some of their owners are resisting.
In the past month, Ukrainian courts have overruled decisions of the national regulator and the state Deposit Guarantee Fund on insolvency and liquidation of eight banks, including Capital, Union, Ukrinbank and Kievan Rus banks.
According to Viktor Novikov, the head of the fund’s legal department, a further 15 are currently pursuing the same path.
The NBU successfully won one appeal, which upheld their decision to declare Bank Financial Initiative insolvent.
The NBU is yet to reissue a single license to the so-called “zombie banks.”
But Novikov said that even if the regulator wanted to reinstate the banking licenses, there is currently no legal way to do so.
“Hypothetically, even if they do open again, they need to be declared insolvent the next day because they don’t comply with any criteria set out by the regulator regarding banking activity,” he said.
Furthermore, Novikov said the bank owners appear to have no desire to get their licences back.
“Most of them, basically, hand us letters with, I wouldn’t even call it a request, but a demand to hand over the property of the bank,” he said. “They, largely, are interested not in restoration of the bank’s activity but getting their assets.”
Novikov said if the courts rule in favor of all 23 banks, the fund is facing a loss of Hr 215 billion in assets, which are typically used to compensate creditors of the bank.
It has also already paid out Hr 30 billion to its depositors through government budget means.
The NBU is currently appealing more of these decisions in the supreme court.
Plan and politics
As it currently stands, former PrivatBank owner Kolomoisky appears to be going along peacefully with the handover of his bank. If he manages to avoid repaying the alleged $5.6 billion in unpaid insider loans, he will have gotten a free pass on his debts from the government.
Political analyst Volodymyr Fesenko said that PrivatBank’s former owners would only be likely to go on this path should some sort of conflict arise between them and the government.
Oleksandr Savchenko, rector of the Kyiv International Institute of Business and a former NBU official, said “there is a possibility that we will see a conflict arise over the next few weeks” as the bank’s insider loan debts are restructured.
Dragon Capital’s Anastasia Tuyukova said that legal maneuvering could be in the future.
“Zombie banks are just appealing to courts and getting a decision so that they can return to the market, that it was not legal for the central bank to liquidate them,” Tuyukova said. “So in Ukrainian courts, it is also possible.”
PrivatBank never lost its license, removing a hurdle that zombie banks face.
But Kyiv attorney Arsen Marinushkin said it is not a question of how Kolomoisky will reclaim his sold assets, but whether he wants to.
“By offloading the bank, he has only got rid of many of his problems,” he said.
In addition to $5.6 billion in insider loans, Kolomoisky has also gotten rid of losses associated with seized assets in Russian-occupied Crimea as well lawsuits lodged by Crimean depositors seeking to recoup their lost money from PrivatBank.
Marinushkin, who is representing a number of former Crimean PrivatBank clients, said he was doubtful that Kolomoisky would launch a legal challenge against the government to reclaim the nationalized assets.
“Kolomoisky is an oligarch and he will just negotiate with everyone to save his business and his money,” he said.
