Ukraine’s foreign lenders have sent a strong signal to Kyiv’s government, urging it not to revive one of the nation’s most troubled banks in collaboration with Dmytro Firtash, the controversial natural gas trading billionaire and supporter of President Viktor Yanukovych.
Experts say concerns from the International Monetary Fund and World Bank rest largely on Firtash’s role in the 2008 bailout of Nadra Bank. Back then, he pledged to buy and salvage the financially collapsing bank, thereby opening the door to more than $1 billion in central bank assistance that critics insist was largely stolen or misused.
Much of the $1 billion in central bank aid issued in late 2008 after Firtash gave a guarantee to buy and salvage the bank went missing, as did the bank’s chief executive officer, Igor Gilenko, leaving the state with the bank’s still large debt obligations to their depositors.
It is estimated that Nadra owes more than $3 billion overall to government, individual depositors and commercial entities.
Under the new bailout proposal, Ukraine’s government would receive a controlling 50 percent plus one share stake in Nadra in exchange for a $613 million cash infusion. An additional $613 million would be provided by Firtash’s Group DF in return for the rest of the shares in the bank, which was put under central bank control soon after the global financial crisis struck in late 2008.
Purported excerpts from a joint letter from the IMF and World Bank warning against the move began leaking onto the Internet on May 26 – the day after the government’s bank recapitalization committee endorsed the proposal.
“Absent a satisfactory analysis supporting a different decision, our recommendation has been to minimize public costs by resolving Nadra through liquidation,” the World Bank said on June 1.
“International financial institutions and investors don’t like the look of the deal or the fact that Firtash is involved,” said Oleksandr Zholud, a banking specialist for the Kyiv-based International Center of Policy Studies. “They don’t think it would be fair for Firtash to have a role in managing the affairs of the bank.”
Once ranked as one of Ukraine’s top 10 banks, Nadra collapsed like a house of cards when the global financial crisis swept across the globe in hurricane fashion. Its ownership before the crisis remains hazy, and no high level officials have been brought to justice for alleged wrongdoing or mismanagement of the bank.
While prime minister last year, Yulia Tymoshenko nationalized three other troubled banks, but stopped short of nationalizing Nadra, calling instead for an investigation into massive abuses.
In December 2009, Tymoshenko said Firtash misused funds provided by the central bank to recapitalize Nadra and Rodovid Bank, one of the nationalized banks. She also suggested that Yanukovych, whose presidential candidacy was backed by Firtash, could have benefitted.
“You know that Firtash, who destroyed Rodovid Bank, is the right-hand man of [Viktor] Yanukovych, [the leader of the Party of Regions], and today he finances Yanukovych’s election campaign... The same people control Nadra Bank,” the former premier said in December 2009. She earlier called for the resignation of then President Viktor Yushchenko and National Bank of Ukraine Chairman Volodymyr Stelmakh for botching the central bank’s $10 billion bank recapitalization program.
Gilenko, the former Nadra Bank chief executive officer and a Russian citizen, as well as several top bank executives, disappeared from Kyiv in early 2009.
State prosecutors say they are looking for the bank officials in connection with alleged misuse of the recapitalization funds. But no investigation has focused on Firtash, who claims Tymoshenko has waged a politically-motivated campaign against him by cutting him out of the lucrative Russia-Ukraine gas trade and destroying the reputation of Nadra through a smear campaign.