Such news from the banking sector terrifies the market. Especially since it's happening right now, in the midst of external military aggression against Ukraine. After lengthy, unsuccessful attempts to recover its funds, the Feodosia state-owned enterprise supplying petroleum products is forced to file a lawsuit against the bank that served it. The state-owned enterprise, part of the Ministry of Fuel and Energy, is suing Ukrbank... for its own 30 million hryvnias held in accounts at the bank, which it hasn't been able to access for six months. Just think about it. A commercial bank owned by the Luhansk Party of Regions, led by Oleksandr Yefremov and Viktor Tikhonov, simply seized the state-owned enterprise's funds. This isn't a disputed asset, not collateral, but rather funds in a current account.
Following the annexation of Crimea by the Russian Federation, the Feodosia State Enterprise for the Supply of Petroleum Products, like most Ukrainian enterprises in the Autonomous Republic of Crimea, re-registered in Kyiv as the State Enterprise for the Supply of Petroleum Products, a subsidiary of the Ministry of Fuel and Energy. However, it was unable to transfer its funds from its account at Ukrinbank. Not only was this a direct violation of the bank's business obligations stipulated in the service agreement, but it also violated banking secrecy and, in essence, constituted theft of public funds. As a result of these actions, the state-owned enterprise's operations (and, in particular, its provision of petroleum products to ATO forces) were blocked. The bank violated virtually all regulations pertaining to banking activities—from the Economic and Civil Codes, banking laws, and funds transfer laws to NBU instructions.
According to current legislation (Article 75 of the Law on Banks and Banking Activities), if a bank fails to notify a client in writing, stating the reason for failing to fulfill the client's request, and fails to take measures to restore its solvency, the NBU is obligated to classify the bank as problematic. The state-owned enterprise has already filed corresponding appeals to the NBU and the Prosecutor General's Office, as well as a lawsuit to seize the bank's assets and recover the stolen funds, but no one knows when the bureaucratic apparatus will begin to take action to protect it from the bank's arbitrary actions. During this period, the company could very well go bankrupt, as 30 million hryvnias in working capital is a considerable sum. This includes unpaid salaries and taxes, unfulfilled petroleum product purchases, and unfulfilled obligations. UkrInBank has previously been guilty of such offenses as arbitrary disposal of client deposits and unilaterally increasing loan interest rates several times over the original. But somehow they all got away with it, especially considering that the bank's political patronage was exercised by the Luhansk faction of the Party of Regions – Oleksandr Yefremov and his subordinates, Ukrinbank Chairman of the Board Volodymyr Klimenko (who previously managed Avtokrazbank and BIG Energy Bank, which went bankrupt as a result of illegal funds transfer, and was involved in money laundering through Brokbusinessbank) and his partner, Ukrinbank co-owner and former deputy head of the SBU Mykola Herasimenko. After the events of February 2014, most of the Party of Regions transferred their funds, hastily removed from the State Tax Administration of Ukraine, Donbassenergo, Soyuz Bank, and other interesting locations after Yanukovych's flight, to Ukrinbank, allowing these respected individuals to remain in the country without financial constraints.
Despite being one of the first Ukrainian commercial banks, Ukrinbank has always had a dubious reputation. Other banks refused to consolidate assets with it, and businesses refused to invest in it. Several dubious cases involving the resale of collateral from companies that had taken out loans from the bank, and a number of smaller scandals involving denials of deposits to individuals, have left its reputation in the banking sector permanently tarnished.
Realizing that it was impossible to profit from petty fraud and attract funds from serious investors at the same time, in 2004 its owners decided to prepare the bank for sale. This was done, again, at the expense of their clients. When the scheme fell through, the pre-sale preparations, funded by the clients, were repeated again and again.
When even potential buyers in Ukraine ran out, Klymenko continued his search abroad. But the bank remains unsold. Its reputation precedes it. Essentially, UkrInBank is an MMM-like pyramid scheme in the banking industry. Old payments are made at the expense of new clients, lured in with "favorable" offers. Where does the money thus "earned" go? It's possible it goes directly to funding terrorist organizations in the Luhansk and Donetsk regions.
Incidentally, Ukrinbank's first problems with payment delays for the Feodosia state-owned enterprise began this spring, just as the "little green men" were confidently entering Crimea. And at the same time, by a strange coincidence, Ukrinbank's press service released a statement from Supervisory Board Chairman Volodymyr Klymenko, stating that "Ukrinbank, part of a group of large banks, plans to increase its authorized capital by UAH 200 million in 2014, to UAH 605 million. The bank is currently completing the process of increasing its authorized capital by UAH 100 million, to UAH 405 million. After registering the share issue, shareholders will consider increasing the authorized capital by another UAH 200 million," Klymenko said. It seems that Ukrinbank learned of the annexation before anyone else in Ukraine and had no doubt that it would get away with stealing state funds, so it calmly planned to increase its authorized capital using funds stolen from clients.
Pirate banks are the worst possible description for a country fighting for its right to exist and be called civilized. This is the most frightening thing imaginable about the Ukrainian banking system, for which client trust is now like thin ice on which our economy is gliding. And if Ukraine continues to allow itself to be brazenly robbed by dubious financial institutions that cynically and with impunity break the law, this is certainly not the best signal from the Ukrainian government and its President to the EU and the world. This is especially true after the hard-won approval from the IMF and the EU to allocate further tranches of loans and financial aid to Ukraine to stabilize the economy and the difficult negotiations over assistance in the war and sanctions against Russia.
Pavlenko Vladimir, The country's elite
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