Архив метки: Ukraine

Rostislav Kravets: ‘The Kolomoisky effect’ will have disastrous consequences for Ukraine

Ukraine is suffering from a major financial crisis since late 2008, characterized by the world’s greatest devaluations of the national currency.

For the last eight years Ukrainian businesses sustained significant losses, which directly impact the banking sector.

Liquidation proceedings were initiated for more than 70 commercial banks during the period of last two years only.

The reason for the establishment of temporary administration in those facilities and further liquidation of most of the banks is infringement of the regulations of the National Bank of Ukraine and the loss of liquidity.

Few banks are exception to this trend. These banks are closed for political reasons and have non-transparent ownership structure.

The main course of insolvency of banks is withdrawal of funds by the banks’ owners and provision of business credits associated with the shareholders of the banks.

As for individual loan default — it became clear that the loan portfolios were insignificant, when compared to the stolen funds by the shareholders.

In my opinion, the current situation is a result of total corruption in the NBU and systematic, unpunished law violations committed by bankers.

Most of the bankers got used to the fact that NBU is «blind» to violations.

However, using the task set by the International Monetary Fund before Valeria Gontareva, the NBU governor, to reduce the number of banks in Ukraine, banks are being liquidated one after another. This was coursed by the longstanding disregard for laws and inability to bring bank’s condition into compliance with the law.

The exceptions were the large banks such as Forum, VAB Bank, Delta Bank, Nadra Bank, the Bank Finance and Credit and a number of others, which the NBU hesitated to liquidate and delayed this process for several years despite the conclusive knowledge about the catastrophic conditions of the banks and their inability to fulfill their obligations.

Meanwhile owners of these banks used allowed time to withdraw funds from financial institutions.

All of them to this day feel certain of their impunity, which is caused by the so-called «Kolomoisky effect».

This concept appeared with a regard to the public statements of one of the richest people of Ukraine and the owner of the Privat group — Igor Kolomoisky on unpunished disregard of the law. And this reference was followed by many wealthy people in Ukraine.

The «Kolomoisky effect» led the largest commercial bank in Ukraine – PrivatBank to go weak at the knees.

Almost 60 percent of all individuals’ deposits placed in the banking system of Ukraine today are placed in this bank. Its services and numerous branches are very convenient. In addition, liquidation of a large number of banks and payment of their funds to their investors through branches of PrivatBank has significantly increased its customer database.

However, the principle “too big to fail” in this case might not work. The state no longer has money to maintain the liquidity of the bank. Since 2014 law enforcement agencies are investigating the elimination of almost $ 1 billion from the structure of PrivatBank.

It should also be noted that according to PrivatBank’s reports more than 95 percent of the loan portfolio is allocated in enterprises of Dnipropetrovsk Oblast where the greatest amount of the assets of Privat group is situated. This leads to conclusion that the bank is actually lending its own business at the expense of funds involved from its private clients.

This information is justified by the reports of PrivatBank for the last year, where the insider lending regulations are significantly violated. Thus for the last two quarters of 2016 PrivatBank ceased to indicate this information in their reports at all.

Over the past two years PrivatBank implemented a practise of no-return deposits to depositors for no good reason. A large number of PrivatBank’s clients accounts are being blocked by the Bank in order to avoid funds withdrawal under the guise of financial monitoring.

The problem is evident from the Bank’s rapid growth of enforcement proceedings on recovery of funds from it. Nevertheless, PrivatBank, as previously did Finance and Credit Bank and Zakhidinkombank trying to block the recovery of funds using illegal restraints issued by the court. The ban on collection of funds extends even to the NBU, which is not much in a hurry to challenge this court ruling.

The situation at hand and the regular visits of one of the main shareholders of PrivatBank — Kolomoisky to the Executive office of the President and the National Bank of Ukraine in my estimation is an evidence of serious problems at the Bank.

It should be noted that main assets of the Privat group – the oil business is now in a difficult position with due to a large debt to the State budget and the lack of addressing this issue out of the court.

Comparing all these facts, we can conclude that “Kolomoisky effect” and continuous disregard of the law in the end will lead to the collapse of the entire Private»group. This will result in a possible emergency nationalization of PrivatBank and freezing public funds for an indefinite period, or its irretrievable loss.

Rostislav Kravets is a senior partner with Kravets & Partners law firm in Kyiv for Kyivpost.

Адвокатская компания Кравец и Партнеры

Ukraine Crisis: On Devaluation, Consumer Protection & Electronic Money!

TL: Briefly describe how the unstable political situation in Ukraine affects consumers and the banking services sector? How has it led to a Ukraine crisis?

RK: Political instability strongly affects the Ukraine economy. Ordinary consumers of financial services in Ukraine remain the most vulnerable. From 2006 to 2008, Ukraine was very advanced in foreign currency lending. Banks actually refused to give loans in the national currency and tried to give out nothing but foreign currency loans: US dollars, Euros, Swiss Francs, etc. The average rate on foreign currency loans ranged between 10 and 14% per annum.

Since 2006, the national currency has devalued by 400% and, in turn, the population’s income has decreased several times. The result has been a failure to return foreign currency loans.

The State has been effectively eliminated from this problem. Meanwhile, the first wave of devaluations, which occurred in 2008-2009, was approximately 60% for US dollars and Euros and 100% for the Swiss Franc. The second wave made it impossible for 95% of the borrowers to repay their loans. And, once again, the government did not notice this problem, leading to this Ukrainian crisis.

In the period of 2014-2015, about 50 banks of the 180 available in Ukraine ceased their operations. This, in turn, adversely affected the situation of borrowers because many had deposits. A special governmental institution, the Deposit Guarantee Fund, is now using any excuse not to pay back owners their deposits. In addition, the amount of the guarantee is quite small, only about 9,000 USD.

The level of confidence in banking institutions is practically non-existent. Most investors are frightened by the actions of the National Bank and the Deposit Guarantee Fund and are trying to withdraw their deposits.

TL: What Ukrainian government measures are in place to protect consumer rights in the banking services sector?

RK: In general, the government does not deal with this problem in the Ukraine economy with the hope that it will take care of itself. However, politicians are trying to use it before the upcoming fall elections. They hand out promises and create visibility for themselves by providing solutions to the Ukraine crisis. Recently, the Parliament almost passed a law that would solve the problem with currency borrowers. But the speaker of the ruling party manipulated the vote process and sent the law to a third reading in violation of the regulations of the Verkhovna Rada, the country’s Supreme Council.

There is also government inaction with respect to depositors. The government even helps bank owners evade responsibility for leading banks into bankruptcy. Law enforcement agencies have indisputable evidence of theft of depositors’ funds, yet they do nothing. The government even helps owners take abroad withdrawn funds they receive from the National Bank’s refinancing.

Also, for more than a year, the National Bank forbids banks to fully reimburse depositors of foreign currency deposits. No more than $ 620 a day in refunds is allowed. Many banks have not returned deposits for more than a year, and the National Bank has taken no action with regards to this issue.

TL: What improvements are needed to ensure greater consumer protection in this sector and end the Ukraine crisis?

RK: Ukrainian legislation widely protects the rights of consumers of financial services in the Ukraine economy. But it is not obeyed and it is ignored by regulators. This, in turn, allows for plenty of abuse.

TL: At the end of last year and this year, the National Bank of Ukraine decided to ban Bitcoin transactions in order to reduce the financing of terrorism. What are your thoughts on this digital currency and its role in the Ukraine economy?

RK: It never played any role in Ukraine. In Ukraine today, there are significant limitations on the use of even authorised electronic money. Current legislation states that users have the right to use electronic money for payments using electronic devices in the amount equivalent to $ 1,450 a calendar year.

Moreover, the users-natural persons have the right to transfer electronic money to other users-natural persons using a prepaid card in the amount equivalent to $ 20 a day and no more than $ 160 within one month. Users–legal entities have the right to use electronic money only for payment of goods. These and other restrictions and regulations make it virtually useless to use electronic money in Ukraine.

TL: Is there anything else you would like to discuss? Please feel free to give any additional comments you have on the issue.

RK: Unfortunately, today in Ukraine, despite the presence of relevant laws, the rights of consumers of financial services are grossly violated. And the government turns a blind eye to these violations, exacerbating the crisis in Ukraine.

Rostyslav Kravets
Partner at Kravets & Partners Law Firm

Taxlinked

Адвокатская компания Кравец и Партнеры

Второй фронт. Atlasjet Ukraine подает жалобу на МАУ и Госавиаслужбу в Антимонопольный комитет

Авиаперевозчик с турецкими корнями Atlasjet Ukraine не оставляет попыток прорваться на украинский авиационный рынок.

3 декабря, авиакомпания подала жалобу в Антимонопольный комитет Украины (АМКУ) на «Международные авиалинии Украины» (МАУ), а также на действия Государственной авиационной службы. Об этом «Капиталу» сообщил старший юрист юрфирмы Marchenko Danevych Андрей Гук, защищающий интересы Atlasjet Ukraine. Копия жалобы имеется в распоряжении «Капитала». Гук также добавил, что Atlasjet Ukraine завершает подготовку соответствующей жалобы в Еврокомиссию, документ планируется подать через три-четыре недели.

АМКУ должен вынести свое решение в течение двух месяцев. Это станет прецедентом для украинского авиационного рынка. В случае если АМКУ полностью примет сторону Atlasjet Ukraine, МАУ может быть оштрафована на общую сумму до двух годовых доходов перевозчика.

Жалоба на жалобе

В жалобе Atlasjet Ukraine около 20 обвинений. В декабре 2012 г. МАУ получила около 80 % прав на эксплуатацию воздушных линий, которыми ранее владела авиакомпания «АэроСвит».

По мнению Atlasjet Ukraine, МАУ и Госавиаслужба нарушили законодательство, потому что не обратились за соответствующим разрешением в АМКУ. Также компания обвиняет МАУ в злоупотреблении «монопольным (доминирующим) положением на соответствующих рынках пассажирских воздушных перевозок путем влияния на решения и действия Госавиаслужбы относительно выдачи и аннулирования прав на эксплуатацию воздушных линий».

В жалобе сказано, что новый порядок предоставления и аннулирования прав на эксплуатацию воздушных линий, который в октябре приняла Госавиаслужба, является дискриминационными по отношению к другим авиакомпаниям и закрывает рынок пассажирских воздушных перевозок для всех новых авиаперевозчиков — конкурентов МАУ. Еще одно обвинение Atlasjet Ukraine в том, что МАУ осуществляет согласованные действия с другими иностранными авиакомпаниями по код-шеринговым соглашениям, не получив на то разрешение АМКУ.

Atlasjet Ukraine просит комитет обязать Госавиаслужбу отменить новый порядок, выдать ему соответствующие документы на выполнение полетов по международным линиям, обязать Министерство инфраструктуры аннулировать права на эксплуатацию воздушных линий, полученные МАУ от «АэроСвита» в декабре 2012 г., и передать эти права другим авиаперевозчикам.

За каждое нарушение Atlasjet Ukraine просит ведомство оштрафовать «Международные авиалинии Украины» и «всех лиц, связанных с компанией МАУ отношениями контроля», на максимально допустимые суммы — до 10 % от дохода за предыдущий год. Согласно отчету о финансовых результатах за 2013 г., чистый доход от реализации продукции лидера авиаперевозок составил 5,9 млрд грн.

Долго будет тянуться

Некоторые обвинения Atlasjet Ukraine экспертов удивили. «Первый раз слышу о необходимости согласования [договоров код-шеринга] с антимонопольщиками. Ни в одной стране мы такого не делали», — недоумевает заместитель гендиректора белорусской авиакомпании «Белавиа» Игорь Чергинец.

В практике Антимонопольного комитета еще не было рассмотрения столь серьезных обвинений в авиационной отрасли, говорит исполнительный директор авиакомпании «Аэроджет» Анатолий Мазуренко. Поэтому он затруднился дать прогноз, на чью сторону станет АМКУ.

У Atlasjet Ukraine есть шансы на удовлетворение жалобы, полагает партнер юрфирмы Rabomizo Денис Рабомизо. Но, как добавляет старший партнер адвокатской компании «Кравец и Партнеры» Ростислав Кравец, даже если АМКУ поддержит Atlasjet Ukraine, решение этого ведомства в дальнейшем может быть обжаловано в судебном порядке.

Получить комментарии в МАУ, Гос­авиаслужбе и АМКУ не удалось. Не предоставили комментарий и в юрбюро «ECOVIS Бондарь и Бондарь», которое обслуживает лидера авиаперевозок.

Дмитрий Уляницкий, Капитал

Адвокатская компания Кравец и Партнеры