Another exodus of high-ranking employees from the National Bank of Ukraine has raised concerns about its future.
A dozen employees, including several department heads, have resigned in the last two days.
They accused the central bank’s leadership of destroying collegiality and department independence to have more central control over important decisions.
The NBU, which regulates banking and monetary policy, is tremendously influential. Many officials agree that collegiality is what ensures the NBU’s independence, which in turn ensures Ukraine’s macroeconomic stability.
The concentration of power, on the other hand, threatens the independence and hard-won reforms to Ukraine’s troubled banking sector. Seven years ago, poor NBU regulation contributed to the sector’s collapse, which cost the taxpayers at least $15 billion and let to the liquidation of more than have of the nation’s banks, leaving just 73 today.
“We sincerely love the NBU and want to continue working there,” said Oleksandr Bevz, the now-former director of the licensing department. “However, it’s currently impossible to continue our work in the National Bank. The centralization of decision-making in one pair of hands, the replacement of collegiality with directive decision-making, are in our opinion, unacceptable.”
It’s a familiar complaint. After former NBU governor Yakiv Smolii resigned in June 2020 due to “systemic political pressure” and was replaced with governor Kyrylo Shevchenko, numerous high-level employees resigned as well.
Some of them told the Kyiv Post that Shevchenko’s “autocratic” leadership style made it difficult for the bank to fulfill its mandate of keeping the financial system stable and troublesome banks under control.
The NBU’s press service did not immediately respond to requests for comment on July 1. Earlier, the press service put out a statement that the central bank is committed to collegiality.
The outgoing officials were the heads of some very important departments, in charge of licenses for banks and financial stability. Experts who spoke with the Kyiv Post fear that their replacements may not be as professional or honest.
Departures
Bevz was the first person to announce his resignation on June 30. His entire team joined him in walking out.
According to him, the NBU no longer meets its own standards for transparency, independence and department autonomy.
Bevz told the Kyiv Post that there were many reasons for his decision but the last straw was a conversation with his manager, deputy governor Yaroslav Matuzka.
He declined to share what the conversation was about but, he said, it became clear that he could no longer make policy decisions in his own department. “We had a high risk of losing the staff independence of the department,” Bevz told the Kyiv Post.
On the same day Vitaliy Vavryshchuk, former director of the NBU financial stability department, also announced his resignation.
“I completely share the expressed position,” he wrote on Facebook, in response to Bevz’s post. The Kyiv Post’s sources said that Vavryshchuk will leave in July.
A day later, Oleg Novakovskyi, a director of the credit support department, also announced his resignation. He wrote on Facebook the NBU “proved that a state institution in Ukraine can be modern, progressive, valuable and effective” but it also demonstrated that “Soviet-style practices can be restored faster than for a year”.
Other high-level employees soon announced their departures, including Artem Klyuka, a head of real sector risk analysis division in the financial stability department and Nataliia Hudyma, a project and program head of the licensing department.
Media outlet Liga.net reported that Denys Novykov, head of the inspection department, will resign soon as well.
Separately, deputy governor Dmytro Sologub is also leaving because his term is ending and it’s unlikely that he will be given a new one.
Tensions boiling
Employee tensions with the central bank’s top managers began to climb after Shevchenko’s appointment in July 2020 and reached their peak in October when the NBU leadership made big changes to its deputies’ portfolios.
As an example, first deputy governor Kateryna Rozhkova lost her banking oversight role and was given a more limited range of duties.
This happened shortly after Rozhkova and Sologub were given an official reprimand and a vote of no confidence for speaking to the media, including the Kyiv Post, about the state of the central bank. Shevchenko voted in favor of the reprimand, which was later overturned by a court decision.
Banking insiders had previously told the Kyiv Post that this was part of an attempt by Shevchenko and his newly appointed deputy governors to assert more direct control over policy.
On July 1, a person familiar with the NBU who spoke on condition of anonymity because they were not authorized to talk to the press, said that when bank employees complained about certain policy decisions, they were told not to interfere with Shevchenko’s attempts to meet his promises. Which promises those are remains unclear.
Another source said that the NBU’s erosion of independence has come in waves. The latest wave was especially severe, cutting departments out of the loop when making important decisions.
“It’s a completely different approach to making decisions compared to what had been built from scratch before,” said the source.
For now, the NBU leadership still lets departments make minor decisions. However, “for major decisions, the professional opinions of the bank’s employees don’t interest anyone,” the source said. These major decisions entail licensing banks, approving bank heads and deals in the banking sector and financial monitoring.
“If there’s a concrete interest involved, no one wants to hear from you,” the source said.
Employees are also wary of entire NBU departments being restructured. Eugene Dubogryz, a former financial stability deputy at NBU and expert at nonprofit CASE Ukraine, said that NBU’s top leaders intend to change the management at several departments, including the licensing department.
“Rumors of such intentions have been spreading in the NBU for quite a while, for several months,” Dubogryz told the Kyiv Post. Last week, NBU governors already restructured the department of on-site bank inspections, having renamed it to the inspection department, and now they plan to hire a new director for it, Dubogryz said.
“This is an element of a game to get rid of people who are ready to voice their professional opinion,” said one of the sources who was not authorized to talk to the press.
Consequences
According to Bevz, NBU current policy threatens reforms in banking and non-banking sectors.
Dubogryz said the ensuing resignations may lead to licensing delays. The department’s new management may also make legal errors, such as when canceling licences for non-banking financial companies.
More crucially, it might make it difficult to attract high-quality professionals. Departing people are competent and experienced specialists with a good reputation on the market, said Hlib Vyshlinsky, an executive director for Centre for Economic Strategy.
“They can be replaced by less experienced and less competent (people) from below (lower positions), or by people from the market who don’t have relevant experience in the regulator or who may have reputation problems,” said Vyshlinsky.
The current NBU’s policy and massive resignations, as a result, is “a rollback of the reform, which was carried out in the NBU most actively from 2015 to 2017,” he said.
