Oleksandr Hrytsenko, the chairman of major state-owned bank Ukreximbank, was released on bail on Nov. 18 after a dramatic arrest over the weekend in which masked Security Service of Ukraine (SBU) agents snatched him from the street.
Hrytsenko was walking in central Kyiv with his family on Nov. 16 when a group of unknown men bundled him into a black van.
The SBU later confirmed its agents had arrested Hrytsenko at the request of the Prosecutor General’s Office.
Bail was initially suggested at $4.1 million by a Kyiv court before being set at $120,000, Ukrainian media reported on Nov. 19. Hrytsenko has five weeks to pay the bail bond.
In another twist, the Ministry of Finance of Ukraine announced on Nov. 19 that it will select the next chairperson of Ukreximbank in an open process.
Latest banking scandal
Prosecutors accuse Hrytsenko of embezzlement, money laundering and creating a criminal organization.
The SBU said the charges relate to his alleged complicity in the 2014 laundering of stolen assets linked to former President Viktor Yanukovych, the corrupt ex-leader of Ukraine who fled to Russia after being ousted during the 2014 EuroMaidan Revolution.
Critics of the charges against Hrytsenko have said the accusations are baseless and lack substance. Hrystenko’s lawyer said that he is innocent and suggested the charges were politically motivated.
On Nov. 19, the Ukrainian Ministry of Finance posted a job advertisement on its website, announcing an open competition to be chairman of the board at Ukreximbank, an indication that Hrytsenko is being replaced.
A source close to the bank’s management told the Kyiv Post that the decision was not linked to Hrytsenko’s arrest, and that the bank’s supervisory board decided “a couple of weeks ago” to hold the competition. The source also said that, prior to his arrest, Hrytsenko may have planned to take part in the competition.
The finance ministry stated that Ukreximbank’s supervisory board decided to start the competitive process on Nov. 15.
A man walks past the office of Ukreximbank on April 17, 2016. (Volodymyr Petrov)
IMF back in town
Hrytsenko’s arrest come at an inconvenient time for Ukraine’s third largest state-owned bank, which has just over $8 billion in assets and performs a vital role for the government.
A mission from the International Monetary Fund (IMF) is back in Kyiv to negotiate with the Ukrainian government on a three-year loan of $6 billion. Also known as the State Export-Import Bank of Ukraine, Ukreximbank is the sole financial agent of the Ukrainian government for foreign loans borrowed or guaranteed by Ukraine, including from the IMF.
The IMF has repeatedly expressed concern over the stability and security of Ukraine’s banking sector, particularly its state-owned banks and especially PrivatBank, which was nationalized in 2016 after forensic auditors found a $5.5 billion hole in its books.
Ukraine’s largest bank is embroiled in multiple legal proceedings in the U.K., U.S., Ukraine and Cyprus with its former owner, the oligarch Ihor Kolomoisky, a former business partner and key media supporter of President Volodymyr Zelensky. Multiple sources close to the supervisory boards of Ukreximbank and PrivatBank have told the Kyiv Post that Kolomoisky may be using law enforcement to wage a campaign against PrivatBank, the NBU and now other state-owned banks too.
Some experts say Kolomoisky wants revenge following the 2016 nationalization of PrivatBank, which he co-founded, but which was nearly bankrupt after years of alleged embezzlement and insider lending. Kolomoisky has repeatedly denied all wrongdoing.
There are other reasons for the IMF to be worried as its returns to Kyiv. Alexander Pisaruk, chairman of the Ukrainian subsidiary of Austrian-owned Raiffeisen Bank, was also released on bail on Nov. 15, having been arrested days earlier on charges of embezzling $49 million while he was first deputy governor of the National Bank of Ukraine (NBU) in 2015.
The economist, who also served with the IMF for three years, denies the charges.
Banks under pressure
Pisaruk played a part in reforms of the Ukrainian banking sector that took place between 2014 and 2017, while Valeria Gontareva was governor of the NBU. Dozens of insolvent lenders and pocket banks were closed down, while some crisis-stricken banks were bailed out or nationalized. Both Pisaruk and Gontareva were close to then-President Petro Poroshenko.
Charges against Pisaruk allege that he fraudulently conspired with VAB Bank’s owners when he participated in a $49 million NBU bailout of the bank. The lender collapsed one month after the stabilization loan was delivered, and the funds were allegedly never repaid.
Valeria Gontareva said that the arrest of Pisaruk, with whom she worked closely, amounted to harassment by the authorities. She has warned of a malicious and politically-motivated campaign being waged against the NBU, state-owned banks and their supporters in Ukraine.
The senior economist has also told the Kyiv Post that she fears corrupt elements in law enforcement and the courts are being utilized by those who lost out during the clean-up of the banking sector. Individuals, such as PrivatBank’s former owner Igor Kolomoisky, want to settle vendettas and gain an advantage, she said.
As for Raiffeisen Bank, the Vienna-based lender has said they have strong confidence in Pisaruk and rallied behind their chairman in Ukraine.
On Nov. 15, the bank issued a supportive statement, posted his bail of $208,000 and asked him to return to work.
Following the Nov. 16 arrest of Hyrtsenko, Ukreximbank stated that its services and operations would not be affected. The bank “will operate in uninterrupted regular mode” and plans to cooperate with law enforcement “to clarify the case,” its management board said. But not everyone is convinced it can continue business as usual.
Ukreximbank, PrivatBank and Oschadbank are seen as systematically important state-owned banks for the country, forming a trinity that acts as the backbone of Ukraine’s financial sector. The stability of that trinity has some observers and experts concerned.
“It is political… and probably Kolomoisky or (former official Andriy) Portnov’s doing,” said one banking expert with ties to Ukreximbank and Privatbank, who complained that state-owned banks recently come under increased pressure from law enforcement. Portnov is a lawyer and the former deputy chief of staff under Yanukovych. Since returning to Ukraine earlier this year, he has advanced a series of criminal cases targeting Poroshenko and his allies.
The banker, who asked not to be named because they are not authorized to speak to the press, said police and the SBU are targeting the banks while not going after businessmen like Kolomoisky, Gennadiy Boholyubov (PrivatBank) and Oleg Bakhmatyuk (VAB), who allegedly stole money from the banks. On Nov. 13, the National Anti-Corruption Bureau issued a notice of suspicion to Bakhmatyuk for his alleged role embezzling the $49 million.
“This is same case (Hrytsenko arrest) in which they tried to issue a notice of suspicion against Gontareva earlier this year. Maybe Kolomoisky is trying to get another angle on PrivatBank. There are things that need investigating at Ukreximbank, but this is probably not one of them,” the expert said.
“I think what we are seeing is the effects of the return of Kolomoisky, and unfinished business from his perspective,” wrote Timothy Ash, a London-based emerging markets analyst focused on Ukraine.
He also noted that Hrytsenko was close to Poroshenko. “He (Kolomoisky) has always blamed Poroshenko for the loss of PrivatBank, albeit I don’t think that was the case in reality.”
“Forget about growth if they continue to roll out selective justice as seems to be the modus operandi at present. Opponents of the Zelensky administration are under the cosh, supporters are getting the pick of assets by the look of it,” the analyst wrote.
