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Senior Bank Official: Loans Keep Wartime Economy Afloat

State-owned bank upbeat thanks to corporate governance reform

Dec. 23, 2022

A senior official at one of Ukraine’s State-owned banks has said that it is coping with challenges, both internal and external. Speaking in an exclusive interview with Kyiv Post, the deputy head of Supervisory Board at Ukreximbank, Dimitri Chichlo said the bank’s branch in recently liberated Kherson reopened and implemented corporate governance reform ensured the bank's sustainability with record profits.

Ukreximbank is one of Ukraine's biggest banks and has many affiliates around the country. Are there any branches that are still under Russian occupation? What is happening there?

Yes, I’ve just visited our branch in Kherson, which reopened two weeks after the city’s liberation from Russian occupation. The Russians destroyed absolutely everything there. There is great need for equipment and for support to our staff there, especially heating equipment.

Has the bank evacuated members of staff working in Russian-occupied regions of Ukraine?

At the start of the full-scale invasion, the bank worked 24/7 to protect and evacuate its employees from occupied regions to safer places, including Western Europe. This is a great achievement by the bank's management.

How have the operations of Ukreximbank changed since the full-scale invasion began? What challenges does management face?

From Feb. 24 onwards it was extremely difficult to understand what would happen. Preventively, a year ago, when Russia had already started accumulating troops near the Ukrainian border we updated our business continuity plans, which enabled us to roll them out from Feb. 24.

The first priority was to protect our employees and then critical data and equipment.

After three weeks of full-scale invasion, we began issuing loans to customers again, and after Feb. 24 we became the number one lending bank in Ukraine.

We supplied more than 23 billion hryvnias to Ukrainian legal entities in the form of loans since then.

While at the start of the invasion we were focused on surviving, now our focus is on sustaining the Ukrainian economy.

Is the bank still providing the full spectre of services?

Yes, we do. We were the first to issue military bonds at the beginning of the invasion. We reopened our branch within two weeks of the liberation of Kherson.

To what extent do management decisions depend on State authorities? Does the State support the bank's activities?

All the corporate governance reforms that we implemented since 2019, when the Supervisory Board began to operate, have helped to bring the bank to a healthy condition and sustain the Ukrainian economy in wartime. We are giving out loans as much as possible, and this is a sign of the bank's good health.

Can you tell us more about the reform of corporate governance? There was a great deal of public criticism, but according to the statistics, Ukreximbank has become profitable.

Yes, in 2021 the bank’s net results were the best we’d had in 30 years, which is the outcome of the introduction of corporate governance reforms.

We however may not have been vocal enough about the essence of our job. By implementing these reforms in State-owned enterprises, we are in fact defending the interests of Ukrainian taxpayers.

If the bank's money disappears because loans are not paid off by creditors, then funds are taken de facto from the State budget to recapitalize the bank or the bank pays less dividends that go to the State’s budget.

The Supervisory Board therefore defends taxpayers’ money.

On the one hand, we have politicians who will work on making the economic environment more friendly and sustainable and a Supervisory Board made up of professionals who will ensure that the bank is sustainable. Those interests cannot diverge.

Would Ukreximbank survive after a full-scale war without the implementation of these reforms?

In my opinion, no. If a full-scale invasion had happened three years earlier, the bank wouldn't have been able to sustain itself in wartime.

A crisis perfectly reveals the personalities of people.

The president, just by his words, ”I don’t need a ride, I need ammunition,” completely changed the face of Ukrainian leadership.

Even in crises, he is calm and able to lead and to make rational decisions, which is a game changer.

Without leadership it is impossible to manage and lead the bank through crises. The fact that the bank’s management, chosen by the Supervisory Board, was able to lead it through COVID and this full-scale invasion is a direct consequence of the actions of the Supervisory Board.

The Supervisory Board was elected in 2019. We have been drafting the strategy of the bank, and changes in management board were done according to a transparent process.

Ukreximbank had a reputation of being a non-transparent State bank involved in corruption. How exactly has the Supervisory Board managed to change the situation?

Yes. In 2019 two-thirds of the portfolio were non-performing loans. That's a lot, and the bank was virtually bankrupt.

The Supervisory Board ensures that the ratios set by the National Bank of Ukraine are respected by the bank, implementing a risk-based approach and compliance, ensuring there is a professional management board in place, as well as key personal – Chief Compliance Officer, Head of Internal Audit.

The bank was a money loser; but now it’s a moneymaker, and the bank’s operations still make money, even today.

Reforms undertaken by the National Bank to clean up the banking sector in 2014 and implement sustainability ratios have made the sector more sustainable.

Even after this full-scale invasion, the Ukrainian banking sector is sustainable. Banks are still issuing credits and supporting the economy.

Ukreximbank has been working actively with international financial institutions. Is this cooperation being prolonged? Are there any changes in the bank's priorities?

This corporate governance reform was promoted and supported by international financial institutions.

The IMF, World Bank, EBRD, and other financial organizations want to ensure that their money will be repaid. Our bank is the sole partner of the World Bank in Ukraine, and we are still giving out loans and credits in accordance with the programs set up prior to Feb.24.

The State should use these State-owned bank corporate governance reforms as an example for other State-owned enterprises, especially in the framework of the EU integration.

Some years ago, everyone used to say that corruption in Ukraine is unbeatable and impossible to reform the State, but we came and showed "yes, it is possible."

It is possible as long as we remain independent and able to work without undue interference from the State.