Ukrainian commercial bank Arkada was declared insolvent on Aug. 25 by the National Bank of Ukraine, and on the following day, the Deposit Guarantee Fund announced a tender to sell the bankrupt bank’s property.
Following the central bank’s statement, the fund took over Arkada’s head office to liquidate the controversial bank from the market. The bank was declared insolvent due to a decrease in the capital ratio to less than one third of the minimum established level.
Arkada’s lost its main asset — its head office building — and a land plot located in the center of Kyiv (3 Olhynska Street). In 2019, the bank used this real estate as collateral for a loan issued to its sister company Arkada-Stroitelstvo, a developer company. According to the bank’s website, it also invests into real estate construction as part of its services. The assessed value of the building in the loan agreement was over Hr 620 million ($23 million), which accounted for more than 27% of the bank’s assets.
The developer’s failure to pay the debt within the agreed time frames gave permission for the creditor to become an owner of the building and brought the bank’s balance sheet into the negative.
More than 90% of the depositors (over 5,000 people) of Arkada bank will recover their deposits in full since most of their deposits do not go over the amount guaranteed by the fund — Hr 200,000, or $7,500 per depositor. Clients with larger deposits will only retrieve the guaranteed amount. The fund will be offering a total of Hr 286 million to compensate for the deposits of eligible clients.
The fund listed several ways on how to withdraw the bank from the market, including through the sale of the insolvent bank to an investor. Ukrainian banks and pre-qualified investors can participate in bidding for the bank’s assets.
Kyiv Mayor Vitali Klitschko was concerned about the residential complexes that Arkada was working on during the past years. He accused the bank of not completing the constructions despite having the opportunity.
“The developer collected more than Hr 13 billion (from those who purchased apartments) but did nothing over the years. This is fraud against investors,” claimed Klitschko.
Over 12,000 Ukrainians deposited their money into Arkada’s construction residential projects. The investors have been protesting since the beginning of spring 2020. Law enforcement offices are investigating the problem.
State-owned Kyivmiskbud, the largest construction company in Kyiv, will be taking over the unfinished buildings that Arkada bank invested in. The mayor has announced that the construction completion date will be determined after an audit which is expected to take several months.
Arkada bank published a statement on its website after it was classified insolvent. The developer wrote that its “27 years in the banking market were not in vain because a lot has been done.”
“We are proud of what we have achieved over the years of service… For now, we must assure you that despite the actions of the National Bank of Ukraine and the Kyiv City State Administration, we will do our best to find a way out of the problem,” the bank stated.
