Ukrainian banks can be bought out for two cents

A new law allows the government to purchase any lender it deems “insolvent,” according to an official statement

Ukrainian President Vladimir Zelensky has signed a decree that will allow for strategic banks to be nationalized if deemed insolvent, according to a document published on the parliament’s website on Wednesday.

The legislation enables banks declared insolvent to be bought out for a symbolic price of 1 hryvnia (less than $0.03) and subsequently nationalized. Currently, there are 14 banks classified as systemically important in Ukraine, a list that includes both private and state-owned financial institutions.

“The state, represented by the Ministry of Finance of Ukraine, participates in the removal from the market of a systemically important bank if the National Bank of Ukraine decides to classify it as ‘insolvent’,” the statement reads.

Once the central bank recognizes a bank as insolvent, it is obliged to notify the lender itself, as well as the government. The decision to nationalize a bank will be made by the Cabinet of Ministers.

Once a lender is declared insolvent, it will be sold for 1 hryvnia regardless of the actual size of the bank's regulatory capital. If the bank is shown to be worth more than 1 hryvnia, the law envisages shareholders being repaid from Russian compensation for the damage caused in Ukraine.

Find more stories on economy and finance in TROIB business