Defusing PrivatBank: A very Ukrainian nationalization
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Defusing PrivatBank: A very Ukrainian nationalization

It is almost a year since the forced nationalization of Ukraine’s biggest bank, whose collapse could have wreaked havoc with the country’s economy. It has cost the country $6 billion and sparked a wave of recriminations and lawsuits. As policymakers try to turn PrivatBank into a viable lender, here’s the inside story of a high-stakes national psychodrama.

Illustration: Paul Daviz



Nationalizing any bank can be a tricky business. When the institution in question holds over a third of a country’s retail deposits and processes three quarters of its payments, the task could be fairly described as daunting. Add in powerful oligarch owners, endemic corruption and an economy still recovering from revolution and recession, and you have all the ingredients for a high-stakes national psychodrama. 

That is the situation the Ukrainian authorities found themselves in last December. PrivatBank, the country’s largest lender, had become a liability. Stress tests had raised serious concerns over the quality of the corporate loans that made up the vast majority of the bank’s assets, many of which had been pledged as security against emergency refinancing from the central bank.

Repeated pleas to the bank’s largest shareholders, Igor Kolomoisky and his business partner Gennadiy Bogolyubov, to restructure and collateralize the loans had been largely ignored. The National Bank of Ukraine (NBU) was warning of a potentially disastrous capital shortage. 

The IMF, Ukraine’s main financial backer since the 2014 Maidan revolution, was pushing hard for nationalization.

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