Ukraine’s parliament has passed a bank law critical to unlocking international financial assistance in its first reading.
Colloquially known as the “anti-Kolomoisky law” after oligarch Ihor Kolomoisky, the bill’s adoption is the main requirement for Ukraine to secure a much-needed $5.5-billion loan program from the International Monetary Fund (IMF).
The draft law received the support of 267 lawmakers, primarily from President Volodymyr Zelensky’s 248-member Servant of the People party and two opposition parties, Voice and European Solidarity. Without the support of the opposition, the law would have fallen one vote short of passing the first reading.
Lawmakers also voted to speed up the adoption of the law, giving the parliament’s finance committee less than two weeks to prepare it for the second reading.
If passed in the second reading, the law would ban the return of nationalized banks to their previous owners. Most prominently, that would include Ukraine’s largest bank, PrivatBank, which was nationalized in 2016. Previously, it had belonged to Kolomoisky and his business partner, Gennady Boholyubov.
Prior to PrivatBank’s nationalization, the National Bank of Ukraine discovered that $5.5 billion were missing from its ledgers. Later, a forensic audit by American corporate investigations firm Kroll revealed that the vast majority of the bank’s loan portfolio was insider lending and money laundering operations.
Currently, state-owned PrivatBank is suing Kolomoisky and Boholyubov in Kyiv, London, Geneva and Tel-Aviv. Kolomoisky is suing to take back the bank in Kyiv. He accuses the state of raiding his property.
The U.K. courts have called PrivatBank an example of “fraud on an epic scale.”
The bank law
According to the draft law, if a court rules against the National Bank’s declaration that a bank is insolvent, this would not restore the former bank’s status, nor would it void any transactions carried out to withdraw the bank from the market or liquidate it.
It would also grant no rights to anyone who participated in the bank’s management at the time of the court’s decision. If the court did rule against the National Bank, the only legal recourse that would be available to a bank’s former owners would be to seek compensation.
The former owners would be responsible for proving the losses that they incurred as a result of the bank’s closure. The value of the bank’s shares would be based on a financial report by an internationally recognized auditor.
Read More: New ‘anti-Kolomoisky’ bank bill heads to parliament
Additionally, a ruling against the National Bank would also not free the bank’s former participants from civil, administrative or criminal liability.
The bill further specifies that legal disputes over the declaration of insolvency would be heard by administrative courts only. PrivatBank’s former owners have turned both to administrative and economic courts to dispute the nationalization.
IMF support
Passing the bank law is one key step to unfreezing the IMF loan, which Ukraine has long been negotiating to receive. That would help stabilize Ukraine’s economy amid the ongoing economic downturn caused by the COVID-19 pandemic, which, as of March 30, has killed over 30,000 people worldwide and 11 in Ukraine.
The second step is to pass a law lifting Ukraine’s archaic moratorium on land sales. Parliament may vote on that law in the first reading later on March 30.
Read More: Shmygal: Ukraine’s GDP to drop 3.9%, shrink to $135.5 billion, in 2020
Together with the $5.5 billion from the IMF, Ukraine would receive an additional $1 billion from the European Union. That would significantly help the country weather the COVID-19 economic storm.
On March 30, Prime Minister Denys Shmygal announced that the country’s 2020 budget revenue will decrease by Hr 123 billion ($4 billion). Additionally, Ukraine’s unemployment will rise to 9.4%, while the country’s gross domestic product will decrease by 3.9% in 2020, according to a March 29 government estimate.
