3 Min Read
KIEV, July 3 (Reuters) - Ukraine is taking legal action to recover loans made by the country's largest lender, PrivatBank, many of which were paid out to businesses linked to former shareholders, including tycoon Ihor Kolomoisky.
After a July 1 deadline to restructure the loans passed, the central bank said on Monday the authorities had "moved to a legal procedure for the repossession (of the loans) ... the specific steps of which can not be disclosed now."
PrivatBank was nationalised in December as part of an International Monetary Fund-backed reform to clean up the Ukrainian financial system. Dozens of lenders have closed since a pro-Western government took office in 2014.
Wrangling between the state and PrivatBank's former owners over the lender's loan portfolio threatens to complicate the rescue. According to the central bank, risky lending practices left Privatbank with a capital shortfall of over $5.5 billion, and virtually all of its corporate lending had gone to companies linked to its shareholders.
One of Ukraine's richest men, who wields considerable political influence, Kolomoisky was PrivatBank's main owner. As part of the rescue, PrivatBank's former shareholders agreed to restructure loans paid to related parties by July 1.
Kolomoisky, speaking via a news website he owns, said negotiations over the loans started in June and would go on for as long as necessary for the two sides to reach an agreement.
"I can inform that the former owners of PrivatBank, in accordance with their commitments, are taking part in the negotiation process on restructuring their 'loans' with a consortium of companies that received a mandate to represent the interests of the Ministry of Finance and PrivatBank, which was agreed with the International Monetary Fund," he was quoted as saying.
PrivatBank's nationalisation has so far cost taxpayers $4.3 billion, but an Ernst and Young audit of the lender's 2016 annual report showed additional funds worth $1.5 billion are needed to meet capital adequacy requirements.
That would be a further burden on Ukraine's already strained public finances and would mean more has been spent on recapitalising PrivatBank since December than the annual defence budget amid a long-running conflict with Russia-backed rebels.
Kolomoisky has rejected the central bank's assessment of the health of PrivatBank's loan portfolio and accused the regulator of unfairly targeting the bank.
After the deadline passed, the finance ministry said "no significant progress has been made towards restructuring. Instead, we are observing a coordinated legal and media campaign against the interests of the state." (Writing by Matthias Williams; Editing by Mark Potter)